Budget 2011 – Not much for the Commercial Property Sector – by William Hinckley

Once again, George Osborne’s budget contained little to excite the commercial property sector, despite promises to ignite the enterprise and business worlds. Small businesses will be relieved to have had their rates relief extended for a further year, but this will only assist businesses who occupy properties with the combined rateable value of less than £18,000. The well intentioned Chancellor also proposed 10 ‘improvements’ to the planning system including a “presumption in favour of sustainable development” and a ”streamlining of the planning process”, the latter having the somewhat ambitious (and rather unlikely) objective that all applications, including any appeals, will be dealt with within 12 months. These proposals fly in the face of the coalition government’s “localism” agenda which seeks to give the electorate the veto about whether a development proceeds or not, and which had the immediate effect of sharply reducing the number of planning applications as both councils and house builders got to grips with the new system. The 10 changes announced by George Osborne are not all without merit, but all require serious further thought to ensure that they don’t cause more damage than good. One proposal which will have caught the eye of commercial property owners was the proposal to consult on plans to make it easier to convert commercial premises (by which we assume offices) to residential. It is admirable that the Chancellor is looking to find ways to invigorate both the residential and commercial markets by providing the opportunity to create more cosmopolitan 24 hour ‘living’ towns where there is a mix of business, retail, restaurant and living accommodation. There are undoubtedly some towns which still have an over-supply of outdated, empty, or partially empty office buildings where the local council is resisting conversion. In many towns, however, office-to-residential conversions have been taking place for the last 10 to 15 years. The problem is that in areas where office rents are below £20 per sq ft it is unlikely to be viable to replace the old stock with new offices and, as a result, there is a diminished supply of offices. In such towns this proposal, which has absolutely no regard for the requirements of the business community, could drive the office occupiers from the town or city centre.