Almost 20% of Commercial Buildings fail to meet new Government Energy Standards

Almost 20% of Commercial Buildings fail to meet new Government Energy Standards

 

Almost a fifth of all the commercial property owners in the UK will be required to make improvements to their buildings to comply with new government energy standards. Failure to comply will see property owners run the risk of being barred from letting their properties.

The Energy Act was passed in the last Parliament and it includes rules that come into play in 2018. These new rules state that it will be unlawful to rent out a business property which does not meet the minimum energy efficiency standard. This minimum standard is an “E” rating with “A” being the highest possible efficiency rating.

The research was carried out by a national property agency and it found that nearly 20% of all commercial property currently has a rating of “F” or “G” which means they will have to make an improvement before 2018 to avoid penalties and the risk of no longer being able to rent out their property. Another 19% of properties are currently rated “E” according to the research which sees them teetering on the brink of compliance. The research categorised nearly 40% of all properties as potentially running into a performance risk if changes aren’t made before 2018.

From 2018, buildings that do not meet the minimum Grade “E” standard will be classified as ‘substandard’ which will affect the value of the property and also place owners in the firing line of penalties up to £150,000 if they do not comply.

The current guidelines require landlords renting out commercial property over 50 sq. m in size to have a government-approved energy performance certificate but they do not need to meet a specific Grade “E” standard and there is no obligation to carry out improvement works. It is very likely both landlords and property owners will be concerned about the level of change they need to make and the costs involved to comply with the legislation which comes into effect in just over two years time.

“Owners should bear in mind that occupiers will increasingly favour higher EPC-rated buildings which will have lower running costs, and help companies prove they have a strong sustainability track record,” said Phillip Webb; a property consultancy expert who helped commission this research.

Offering an attractive prospect to potential tenants means ticking every box and from 2018 this includes meeting the minimum energy efficiency standard.

The current guidelines require landlords renting out commercial property over 50 sq. m in size to have a government-approved energy performance certificate but they do not need to meet a specific Grade “E” standard and there is no obligation to carry out.

 

Written by: John Padgett on Friday 26/02/2016

 

Buy-to-let Landlords Win Legal Battle Against West Bromwich Building Society

Buy-to-let Landlords Win Legal Battle Against West Bromwich Building Society

 

A group of buy-to-let landlords have won a significant legal battle against the West Bromwich Building Society, which is now faced with a £27.5 million compensation bill as a result.

The case against West Bromwich was brought on the basis of claims that the building society wrongfully increased interest rates relating to some of its buy-to-let mortgages.

That claim has now effectively been supported by court of appeal judges, who have left West Bromwich with a very sizable bill to pay.

However, statements given on behalf of the building society have insisted that the pay-out will not put the financial stability of the organisation in any danger.

“Our financial position remains very strong,” a spokesperson for the society said after the recent ruling was handed down.

The ruling related to mortgages provided by West Bromwich to more than 6,000 buy-to-let landlords around the UK on the understanding that the associated interest rates would increase in response to any rises in the Bank of England’s base rate of interest.

However, in 2013, the building society decided to increase the monthly costs of its mortgages despite there having been no corresponding rise in the Bank of England’s base rate at any point since 2009.

It was this decision which court of appeal judges have now decided West Bromwich was not within its rights to take. The case was initially heard but rejected by the high court.

A group of borrowers affected by the issues collectively raised thousands of pounds to legal costs and fought the case as the Property118 Action Group.

As many as 6,415 borrowers who were affected by West Bromwich’s actions are now set to be contacted and refunded any amounts of money they were wrongly charged by the building society.

“Naturally we are disappointed by today’s decision from the court of appeal,” said Jonathan Westhoff, the building society’s chief executive.

“At all times, we acted to ensure we were treating customers fairly and that our approach was in the best interests of the society and its members as a whole,” he said.

Mark Alexander from the Propety118 Action Group wrote recently on his organisation’s website that the court of appeal’s ruling “sends a clear message” to other lenders who have large numbers of customers on buy-to-let tracker mortgages.

 

Written by: John Padgett on Monday 13/06/2016

 

 

How would a Brexit affect the commercial property market?

How would a Brexit affect the commercial property market?

 

On 23 June 2016 British citizens are being asked to cast their vote to decide if the UK should remain in the EU or not. We look at how, and if, a Brexit would affect the commercial property market.

The background

Before a single vote has been cast, the shadow of the EU referendum has fallen over the UK economy in the form of uncertainty. While GDP has increased by 0.4% between Q2 2015 and Q1 2016, continuing the run of 13 consecutive quarters of positive growth since Q1 2013, the British Chambers of Commerce has suggested that the UK economy has softened in the first quarter of the year. The Bank of England also notes that while consumer spending remains resilient, annual rates of activity growth have slowed, reflecting both shrinking world growth and an increase in unease.

Analysts on both sides of the debate are producing statistics which they claim enhance their arguments. The London School of Economics and the Centre for Economic Performance are predicting that UK GDP will fall by up to 3.1% if the UK decides to leave, while other economists are forecasting a rise in GDP of 10%. While nothing in this debate is certain, we now look at how both scenarios might affect commercial property in the UK.

The case to remain

Before the Scottish referendum on independence in 2014, there was a 10% fall in property sales in the eighteen months running up to the vote. However, after the result, the market caught up. The organisation expects commercial property investors to behave in a similar manner in the EU referendum, and delay any decisions until after the vote has been cast.

It seems that this scenario has already begun, with commercial property in London being affected by this uncertainty. Several commercial property fund managers have changed their pricing basis which has, in effect, cut values by between 5 – 6%. It has been noted that investors are unwilling to commit to, for example, long term construction projects given the prevailing atmosphere of uncertainty which may affect tenant demand, post-Brexit.

The IMF and the Treasury have also warned that house prices could fall dramatically. The National Association of Estate Agents has put this figure at £2,300 outside London and £7,500 in London. And while this might seem to be a blessing for first time buyers, the Association of Residential Letting Agents has warned that because of the reduced amount of demand for housing (due to fewer people immigrating from the EU) landlords could be forced to cut rents or sell up altogether having found the situation financially unviable.

However, it’s feared that it is in London’s commercial property sector that the worst of the Brexit effect would be felt. Experts argue that many EU companies, particularly investment banks, would move to the continent, vastly increasing the rates of vacancies within offices. Some warn that rental growth could also be negatively impacted by a slowdown in GDP and the uncertainty surrounding any future trade negotiations.

The case to leave

With just over three weeks to go, the polls are as close as they can be – The Economist’s latest Brexit poll tracker shows that 40% want to remain, but the leave campaign has almost as much support, with 39% of people wanting out. Many of the Brexit arguments are founded on the amount of money the UK contributes to the EU – some say as much as £350 million every week – and the unaccountability of EU officials – none of whom are elected here.

HIS Global, a company providing decision-making support for business and governments through information and analysis, has put forward a view that a Brexit would have a long-term positive impact on the UK, in terms of economic consequences, as well as a more homogeneous and clearer EU. Leave campaigners also point out that in the wake of a Brexit, the UK would be able to develop new trade agreements with not only Europe but also developing countries in the world, with whom we currently do not deal.

Those in favour of a Brexit are sceptical of the forecasts of economic doom and gloom were the UK to leave the EU. They claim that Brexit could have a positive impact on job creation and growth, leading to a surge in the economy. Any short-term impacts, they argue, would be outweighed in the long-term by a short period of adjustment in, for example, the UK’s inflation rate and the cost of borrowing, which is most likely to affect those interested in the commercial property market, and that this period of adjustment would last for a matter of months, rather than years, as implied by those who are in favour of remaining.

The result

Amidst claims and counter-claims, polls, opinions and forecasts, the truth is that none of us can know how the commercial property market, as well as the wider economy, will be affected by a vote to leave. As we gaze into our crystal ball, the mist will not clear until after the result has been announced and, as we vote on 23 June, we need to take a balanced and impartial view of the facts and make an informed choice on an issue which will impact all our lives for many years to come.

 

 

Written by: Steven Jones on Wednesday 01/06/2016

 

Understanding capital allowances for businesses purchasing commercial property

Understanding capital allowances for businesses purchasing commercial property

 

In April 2014 the government introduced new rules about claiming capital allowances on commercial property purchases. We take a look at them and ask what you can do to maximise your tax relief.

What are capital allowances?

Capital allowances are deductions you can make to business assets which allow you to deduct their value from your profits before you pay tax. Capital allowances apply to plant and machinery, such as equipment and business vehicles, which you buy as part of a commercial business transaction and which are integral to its effective functioning. By claiming capital allowances, you are able to take advantage of tax relief on the items’ depreciation over a number of years, effectively writing them off eventually.

The 2014 legislation

The new rules were designed to help improve cash flow for businesses, to make the process more transparent and to avoid tax relief being claimed multiple times on the same asset. But claiming capital allowances is a complex issue and often depends on both vendor and purchaser properly understanding the rules.

Capital allowances have to be specifically claimed in order to reduce taxable profits and quite often they are not. This may be because the process is seen as too complicated, few records are kept, or that the results yield little value to the business owner. Sometimes the potential claimant simply doesn’t know that they are entitled to claim, and in other instances their tax advisors have not informed them.

Put simply, if a vendor is selling a commercial property which includes plant and machinery and has not previously claimed for plant and machinery capital allowances, the purchaser will not be entitled to claim tax deductions in the future either.

What you must ask

If you’re looking to purchase a commercial property and intend to claim capital allowances, it is vital that you establish the status of the seller – whether they have claimed in the past so that you are able to do so in the future. During the due diligence phase of your purchase you should ask to see the vendor’s tax records and notes regarding their expenditure while they have owned the property.

In some circumstances, it is still possible, during the purchase process, for the vendor to submit a tax allowances claim, and, if they wish to negotiate the best possible price for their property, they will see the importance of co-operation in this matter. As a potential purchaser of a commercial property without adequate capital allowances having been claimed, you are in a strong position to request a relevant amount be deducted from the sale price as compensation for future tax losses. The onus is firmly on the vendor to put their tax affairs in order so as to not negatively impact on future owners of the business.

If you’re considering purchasing a commercial property and are unsure of the tax status of the vendor, or have other issues regarding commercial property purchasing which you need assistance with, speak to one of the Eddisons’ team. Our advisors can offer up-to-date, professional and confidential advice about all aspects of the process.

 

Written by: Steven Jones on Friday 27/05/2016

 

 

Commercial Property Owners in Scotland Urged to Take Action of Energy Efficiency Planning

Commercial Property Owners in Scotland Urged to Take Action of Energy Efficiency Planning

 

Commercial property owners in Scotland have been urged to take action to ensure that they are able to demonstrate how they plan to improve energy efficiency across their premises.

The warning, which has come from a team of leading Scottish property consultants, states that only a minority of commercial property landlords in Scotland are currently prepared for a new set of regulations which will soon make notably more demands of them from an energy efficiency perspective.

Incoming rules will demand detailed energy efficiency plans of the owners of any commercial property in Scotland that is larger than 1,000 square metres and being sold or rented out.

It is currently estimated that close to 70 per cent of all the landlords who will be impacted by the new laws are not currently compliant with the relevant legislation.

As well as being required to create a plan of action that outlines how a particular building will be made more energy efficient, landlords will also be obliged by Scotland’s new rules to submit relevant data on the subject to the register of Scottish Energy Performance Certificates.

Local authorities are expected to commence enforcement action against organisations that do not achieve compliance with the new regulations once they’ve come into effect across Scotland from September 1st 2016.

The advice for landlords who are set to be potentially affected by the new laws is to take pre-emptive action to ensure compliance comfortably in advance of the introduction of the legislation.

“It doesn’t happen in hours and weeks – it takes time to assess the building and look at energy output,” a spokesperson said.

“Really what we’re saying to commercial property landlords is ‘the time to act is now’.”

The Scottish Government has said that it is aiming through a variety of different forms of legislation to substantially bring down the levels of carbon emissions for which commercial buildings around the country are responsible.

It is estimated that these buildings currently account for roughly 40 per cent of all the carbon emissions generated across Scotland on an annual basis.

 

Written by: Steven Jones on Tuesday 17/05/2016

 

 

UK Commercial Property Rent Values Continue Upward Trend

UK Commercial Property Rent Values Continue Upward Trend

 

UK commercial property assets of all varieties increased their rental values by 1.4 per cent on a collective basis during the first three months of 2016.

That’s according to the latest figures on the subject, which show that rent levels associated with commercial properties throughout the country are currently on an upward curve.

Indeed, at a quarterly growth rate of 1.4 per cent, the rent value increase in Q1 2016 matches the same figure for the final three months of last year – which was the highest growth rate recorded since 2007.

The figures cover all forms of commercial property whether they are used as offices, retail spaces, warehouses or industrial premises of any kind.

Of these sectors, commercial properties categorised as being prime industrial real estate recorded the strongest rent value growth in the first quarter of this year.

At a rent value growth rate of 2 per cent, prime industrial properties across the UK reportedly managed the third sharpest increase recorded during any three month period since as long ago as 2001, according to the latest data.

Meanwhile, the values associated with office space in London continued on a relatively sharp upward curve and increased by 2.6 per cent on average as compared with the last three months of 2015.

The average cost associated with renting prime office space in the City of London jumped by 4.6 per cent in the quarter and the Docklands areas that include Canary Wharf saw average prime rental increases of 5.4 per cent in the period.

Other areas which saw notably strong commercial property rent value increases in the first quarter of this year included the West Midlands, where plans for the High Speed 2 (HS2) rail link are understood to have prompted an increase in investor interest and buyer activity among landlords.

The BBC recently reported that the main offices of the organisation tasked with planning and delivering the HS2 project are soon set to be relocated from London to Birmingham.

HS2 Ltd is expected to employ close to 1,000 people from its offices in Birmingham while retaining smaller teams in the capital.

 

Written by: Steven Jones on Tuesday 17/05/2016

 

Companies Facing ‘$3trn Headache’ Due to New Property Lease Accounting Rules

Companies Facing ‘$3trn Headache’ Due to New Property Lease Accounting Rules

 

Changes to international accounting standards in relation to commercial property leases look set to leave businesses worldwide facing the prospect of adding $3 trillion to their collective balance sheets in the coming months and years.

That’s according to the estimates of the International Accounting Standards Board (IASB), which is the body responsible for bringing in the new rules, along with the Financial Accounting Standards Board (FASB) in the US.

And while the IASB is convinced that obliging companies to detail property leases on their balance sheets will improve transparency, some experts are convinced that the changes will present major headaches to hundreds of businesses worldwide.

“What we are looking at, now that the IASB and FASB have finalised their respective leasing standards, is nothing short of the perfect storm for corporate reporting,” said Richard Farr, managing director of Lincoln Pensions, told Financial Director.

“We have off-balance sheet leases being brought on-balance sheet through some very questionable and subjective decisions about what constitutes the value of the supposed ‘asset’, at the same time as companies are dealing with massive deficits in their defined benefit (DB) pension schemes,” he said.

“Moreover, all this is happening at a time when the global market is looking decidedly wobbly. This is likely to have an extremely negative impact on many companies’ relationship with their banks and with funders, and is very likely to have a severe impact on corporate credit ratings.”

According to Mr Farr, there is particular scope for companies from within the retail, hotel and airline sectors to be adversely impacted by the changes to international accounting standards.

At the heart of the matter for businesses in these fields is the shift from having property lease liabilities go from being off to on their corporate balance sheets, which might not initially be a major problem but could soon become just that in a situation where cash flow difficulties have emerged.

“You create a massive funding gap in the accounts which exacerbates the problems of any company that is starting to run into trouble,” Farr said. “The new treatment will make the balance sheet look far worse than it would have before the new standard came into effect.”

It is thought that some of the world’s largest retailers, whose off-book liabilities are worth billions of pounds, could soon see their financial positions made to look much less healthy as they are obliged to detail these liabilities on their balance sheets as a matter of course.

 

Written by: Steven Jones on Monday 16/05/2016

 

 

How can businesses maximise the sale of their assets?

How can businesses maximise the sale of their assets?

 

If you’ve invested in commercial property, the time might come one day when you need or want to sell your premises. We look at how you can maximise the sale of your physical assets.

Despite a slight reduction in the returns that can be made on commercial property, down to around 8.8% this year, from 2015’s high of 13.4%, it is still one of the most lucrative asset classes to invest in. Astute investors can maximise the return on their properties through some simple strategies before they sell.

Review the rent

To facilitate a smooth sale, particularly where there are sitting tenants, ensure that any upcoming rent reviews have been negotiated and settled to give the buyer a clear indication of the amount of rent he or she can expect from their purchase.

Maintain your asset

The better condition your property is in, the more profit you will make from the sale. It’s a simple concept. Unless you’re prepared to take a financial hit and accept a lower offer, make sure that the property is in good condition – the roof is intact, the doors and windows are modern, energy-efficient and secure, the services, such as gas and electricity, are in good order and have been professionally certified. If a property is vacant, ensure it is clean and clear of the last tenant’s accumulated debris. If you have a tenant in place, ask them to tidy and clean (if necessary) prior to viewings.

Time it right

Of course, any savvy investor will want to sell at the height of the market to maximise profit, but in these days of uncertainty, and a stalling market the timing of your sale is vital. Of course, if you are in a situation where you have no option but to sell, you’ll have to accept that you may not realise the best price possible. However, if you can hold onto your property until the market picks up, you’ll be in a better position to reap greater rewards. Also bear in mind that commercial transactions can take a considerable amount of time so the market may have changed considerably from the time you send your property to market to the time you eventually sell.

Consider a change of use application

A property’s value is based on what potential the buyer can see in it. So if you can offer a purchaser a wider range of options they will be more prepared to buy at the right price. Your local planning office will be able to offer advice as to whether a change of use application will be looked upon favourably.

Prepare a search pack

Being proactive in your approach to selling will stand you in good stead to make a quick and profitable sale. While it’s usually the buyer’s responsibility to undertake searches, shrewd sellers can put together an information pack which, although it will cost money, will recoup more than the outlay in the end.

If you need any advice or information about selling a commercial property asset, contact the Eddisons team. Our qualified and experienced professional advisors can offer you expert guidance to ensure that your property is sold efficiently and effectively.

 

Written by: Steven Jones on Thursday 28/04/2016

 

How to add value to your commercial property

How to add value to your commercial property

 

Commercial property is often seen as a long-term investment with incremental year-on-year gains. However, there are some ways that you can increase the value of your commercial investment – we take a look at the simplest methods of doing so which won’t cost you a fortune.

Improve it

If you’re the owner of an industrial property, this may be easier said than done. However, whether you own a warehouse, retail outlet or residential property, you can add instant perceived value by maintaining the perimeter, ensuring the façade is neat and tidy and the car park, if appropriate, is well-delineated as well as keeping the area litter-free. Any garden areas need to be regularly maintained, the grass cut and the weeds dug out.

Retail and office spaces will benefit from modern, secure, energy-reducing windows and doors which will not only let in more light and reduce noise but also demonstrate that you’ve invested in your property.

If the interior of your property is looking a little dated, get it professionally decorated in neutral shades. This is a sure fire way of attracting the right attention from quality tenants – they can either simply occupy the property and start trading or can stamp their own individual touches on it.

Also consider the utilitarian areas of a property – kitchens and bathrooms in particular. If you wouldn’t want to use the facilities why should your tenants?

Increase its size

If you can extend your property to increase its size, you can either get more tenants in or charge more rent. You will need to seek relevant planning permission before you alter your building.

If you can’t extend, think about maximising the rentable square footage. A qualified surveyor may be able to help you re-evaluate the space and add to the area that you can charge rent on – for example, a large but under-utilised reception area may be able to become a rentable room in an office block or an unused attic space could become an extra bedroom.

Put the rent up

Perhaps the simplest and most cost-effective course of action is to raise the rent. However this has to be tempered with the knowledge that if you raise the rent too much, your tenants may leave and you may have a vacant property on your hands which will generate no income whatsoever. Do your market research carefully and evaluate what the ceiling is for similar properties in your area. If you find you are charging too little, write a clause into the rental agreement at renewal time that the rent will increase in line with market values. This will be especially relevant if you’ve recently made improvements to the property.

Request a business rates re-evaluation

If you’re paying a substantial amount of business rates ask your local assessor to re-evaluate your property. It could be that the current rateable value is based on an assessment which was done at the height of the property boom and could be reduced, saving you money.

If you need advice or information on any aspect of commercial property ownership, leases or valuations, contact the Eddisons team. Our experienced and professional staff can offer you confidential advice on your commercial property portfolio.

 

Written by: Steven Jones on Wednesday 27/04/2016

 

New home for former Drummonds Mill business

New home for former Drummonds Mill business

 

A Bradford-based online retailer whose business premises were destroyed in a devastating mill fire two months ago has relocated to Marrtree Business Park in the city.

Zoozio, which sells homewares, DIY supplies and gadgets to consumers from the  website, was forced to evacuate its Drummonds Mill offices on 28 January when a devastating fire swept through, and almost completely destroyed, the grade II listed former textile mill.

Now the company, which was launched in 2010 and has grown to employ ten people, has found a new home at the 44,000 sq ft Marrtree Business Park on Bradford’s Sticker Lane, where it is has taken the final available, 18,400 sq ft, unit on the site.

Eddisons Director John Padgett, who arranged the letting on behalf of landlord Frank Marshall Estates, said: “The Drummonds Mill fire was a devastating and very frightening incident for everyone involved and we’re really pleased to have been able to help Zoozio relocate relatively quickly to affordable, modern premises that are just a stone’s throw from the city centre.

“All ten units at Marrtree Business Park are now let, which is good news for Bradford’s economy: we are seeing demand for this sort of warehouse and industrial space outstripping supply right across the city as the economy picks up, thanks to the success of businesses like Zoozio.”

Edward Marshall, director at Frank Marshall Estates, said: “For Zoozio, and all the other businesses affected by the fire, it has been a very difficult time and as a Bradford business ourselves it’s very rewarding to be able to help provide them with suitable accommodation in a time of adversity.”

Marrtree Business Park is home to a variety of businesses including distribution and warehousing business Peckover Transport, light bulb manufacturer Crompton Lamps and European Packaging Distributors.

Walker Singleton is joint agent, with Eddisons, on the estate.

 

Written by: on Wednesday 20/04/2016