With evidence that a crippling void tax is making its mark amidst a mini-boom in the demolition industry, there are claims that the government is failing in its duty to think ahead.

As the financial pain of the new legislation which came into force in April this year hits home, landlords are starting to flatten buildings – not only defeating the government’s sustainability agenda but setting the scene for higher rents when demand begins to recover.

Landlords now have to pay full business rates on empty retail and office property following a three-month grace period, whereas previously they received 50 per cent tax relief. Landlords of industrial space have to pay full rates after six months’ grace, whereas previously they had full relief.

Whilst the changes announced in the Pre-Budget Report may have thrown a lifeline to smaller investors or businesses, it is unlikely to make a difference to developers or larger properties.

Paul Beeston, partner with Rider Levett Bucknall, believes initial industry concerns that the property sector would be deterred from building speculatively are unfounded, given current economic conditions.

“Instead we have to look at what fate has in store for those completed developments left empty and the vacated and tired building stock,” he says.

“Projects that have stalled and have redundant buildings now face the dilemma of leaving the space empty and continuing to pay rates or demolishing the building “early” and potentially destroying an asset.

Demolishing a building is most definitely in favour given the current economic conditions.

“The insistence of the government in retaining this tax also means that we have a slowdown in the regeneration of deprived areas,” says Beeston.

“Brownfield sites sitting hoarded off with stockpiled hardcore may not do much to encourage regeneration. Whilst sites may look no worse than dilapidated buildings left empty, potentially valuable assets are being destroyed.”

So what are the options facing landlords? Choosing to refurbish rather than rebuild may give competitive advantage. A refurbished building is likely to be quicker and cheaper to bring to market when the first glints of increased demand are predicted.

Conversions are also finding favour, according to Beeston. The restricted structural heights that may constrain office refurbishments may be less troublesome for a hotel or student accommodation conversion – sectors likely to be fairing slightly better than offices.

“The British Property Federation’s campaign to get the government to rethink the tax hike it introduced on 1 April is gathering pace, so I think we will have to wait and see whether the government will bow to pressure and go further to ease the burden on property owners.

“An abolition of the void rate relief may not initially help the sector but it will ensure that the building blocks remain in place for the future and a full supply of affordable buildings will be available when the market returns.

“Sustainability is supposedly the future.

“Let’s hope the government remembers this too.”