28 March 2022

Would a vacancy tax help revitalise abandoned local shops?

| Lottie Twyford
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Stand By Me cafe

Not all local shops are bustling hubs – some seem to be abandoned – but would a vacancy tax really help? Photo: Daniella Jukic – We Are Found.

From Canberra city’s north to south, suburbs can be found where the local shops simply seem to have been forgotten.

Greens crossbencher Johnathan Davis said the problem is becoming increasingly evident in his electorate of Tuggeranong – much to the frustration of local residents – and he wants something done about it.

He floated the idea of a ‘vacancy tax’ which would be slapped on commercial landlords who leave properties vacant for long periods of time.

“Canberra was designed to ensure each suburb has their own shops, schools and recreation spaces. However, we know of too many instances throughout our suburbs … where commercial property has been left vacant. These vacancies rob communities of their full potential,” Mr Davis said.

In some suburbs there are properties which have been vacant for more than 10 years, Mr Davis claimed.

“We don’t know why property owners are able to keep those properties vacant for so long and we need to get to the bottom of it,” he said.

Johnathan Davis

ACT Greens MLA Johnathan Davis floated the idea of a vacancy tax to try to stop owners leaving properties vacant for long periods of time. Photo: Region Media.

Mr Davis raised a motion in the Legislative Assembly last week which called on the government to investigate if this would work to incentivise property owners to get tenants into their properties.

But Civium director Andrew Smith said he already has the response to Mr Davis’ question – even without an inquiry taking place – and it’s a resounding no.

Mr Smith said a potential vacancy tax on commercial property owners who have vacant buildings would not only be a “severe punishment” for them, but it would not help them source new tenants, either.

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“The holding costs for commercial property owners are already significant when there are vacancies, without the potential for additional charges,” Mr Smith said.

“Nearly all commercial owners use their properties to generate rental income and are therefore always looking for tenants to occupy their buildings.”

Mr Smith said he had never heard of any commercial property owner leaving a space vacant “deliberately” and thought it more likely that a vacancy tax would only serve to further penalise owners and deter investment in this sector.

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“Commercial properties can sit vacant for extended periods due to the normal economic cycles that affect different businesses and this is part of the risk of owning commercial property,” he said.

“It’s not something in the control of owners.”

For example, Mr Smith noted that if a supermarket at a local shop closed it would reduce the traffic at that shopping centre and thereby affect all neighbouring tenants and owners.

“To then tax these owners if their building becomes vacant does not seem reasonable,” he concluded.

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Nevil Kingston-Brown8:18 pm 16 Jan 23

This is the whole point of the shift from stamp duty to land tax.

the best thing about the ACT is the road out of it
overpriced dump

You need successful businesses to fill commercial property. When there is too much property and not enough opportunity to run a successful business in that location, the property stays vacant. A vacancy tax won’t change that.

This is about understanding business, commerce and trade, something about which most ACT politicians and public servants are quite ignorant. They continually intervene in the property and business markets without understanding how they work. This is just another example of commercial ignorance and political arrogance.

If those governing (both Labor & Greens) had thought ahead they would have known this would be the consequence of building too much commercial property. We have a glut of commercial property, where previously there was a shortage.

So many residential buildings now have commercial property below them and there just isn’t enough business to fill them all, especially with the collapse of so many businesses as a result of covid. There was already a glut of commercial property, but the loss of successful businesses has made it worse.

Yet, this government continues to insist on residential buildings having commercial property as part of them. Stop building commercial property and build residential, as that’s where there’s a shortage.

It might also be smart to convert some of the commercial property (in appropriate areas) to residential use, so that we can house our population instead of looking at empty shops that attract vandalism, deter successful businesses and make nearby residents uncomfortable and fearful of crime.

We used to have local shopping centres but now there are shops scattered amongst residential buildings, so people don’t need to go to their local shopping centre and it becomes less worthwhile to run a business in a shopping centre. Businesses leave.

To get some suburbs’ local shops revitalised, it needs more than business owners. It needs the local population to use them, rather than hop in the car and drive to the mall. Notice that in inner suburbs the local shops do much better. Some of this appears to be the varing mind set of the local population. It varies from area to area, and likely moved in when people picked where they wanted to live, because people, to a certain extent, choose where they want to live and some are willing to make sacrifices (smaller house, run down house, apartment instead of house, etc), and others ‘must’ have that four bedroom house, and move to the outer suburbs to get that, because they live a car dominated life anyway and getting in the car to drive everywhere means noting to them. Many would rarely consider other transport, over the four bedroom house. So they then drive to the mall, rather than walk or cycle to the local shops. The local shops die. Meanwhile those who don’t see the mall as the centre of their lives as strongly, and are willing to walk or cycle, and don’t feel the need as strongly for the (new) four bedroom house, are more likely to move closer to the centre, and the local shops survive and may even do well. A different population around them, then out in the outer suburbs and their car centred lives, which moved in with them, rather than evolved once there. I am not saying everyone in the local populations are like that; only that the general ‘mind set’ is likely to vary in different areas, and this has an effect on the viability of local shops

Different mind sets.

The greens will run you out of town to charge a tax on you.
How much of the vacancy is from government meddling.

They want to ban parking cars and families.

Gavin Putland7:12 pm 29 Mar 22

If you’re investing in property, you’re investing in the capacity of the economy to pay rents and service mortgages. Hence you need other people to be earning income. Hence you need other property investors to be making their properties available for the purpose of earning income. Hence you need them to be deterred from holding their properties vacant. And you can’t have one rule for your fellow property investors and another one for you!

Our suburb had the situation where the supermarket owner (who owned most of the shops) was deliberately letting things run down. (in the hope of selling the land for houses?) Fortunately a lively pair took over and re-vitalised the supermarket and the rest of the shops improved. Then cam Covid and we were Soooooo glad we still had local shops.

HiddenDragon6:52 pm 28 Mar 22

“We don’t know why property owners are able to keep those properties vacant for so long and we need to get to the bottom of it,” he said.

An interesting point, given that commercial rates in Canberra are high.

A link between the rate of the Lease Variation Charge and the extent of any vacancies in the previous 5 or 10 years might be worth considering.

Tom Worthington5:24 pm 28 Mar 22

If the land at a local shopping center is not being used for the lease purpose, the lease could be canceled, and reissued to someone else willing to comply with the law. This, of course, assumes that local shops are still a viable and appropriate use for the land.

Does ACT Greens MLA Johnathan Davis understands the real world?

Premises become empty when the business renting them relocates to a better site or goes bust. There are plenty of empty shops that were 2nd tier supermarkets in suburban centres that haven’t been able to complete with the larger chains or shopping malls and a number of other businesses have closed since Covid.
If I were a landlord, I’d lease out my premises, if there were tenants, rather than leaving them empty. A vacant building is more likely to be damaged by vandals and after some time, if your property is vacant, your insurance lapses, not to mention the landlord is still paying Rates etc on a property that is returning nothing.

And Mr Davis wanting to punish the landlord with a new tax!

Mr Davis must be assuming that it’s the landlord’s choice to leave it vacant and secondly that because the owner owns the property, they are cash-rich.

Is this just a brain-fart or is his party leader on-board and they are sounding out the electorate given that in the ACT, Land Tax applies to vacant residential property.

Maybe this is going to be a new ACT ALP/Greens Government tax?

Whilst I don’t agree with this tax proposal, there is no doubt that a lot of these properties are deliberately kept empty with the point of then arguing that they are not viable as solely commercial properties and that the owner should be able to ha e the landuse/lease conditions changed to allow higher value usage like mixed use or residential.

It’s how the game is played.

Vinson1Bernie2:55 pm 28 Mar 22

Lessens the chances of the shopping area becoming revitalised. San Diego tried something similar in the 80’s and landlords just tore them down though in a slightly different context as Sand Diego shopping areas more akin to Sydney than suburban Canberra. I notice my local run down shopping centre remodelling them into offices within the same basic structure .

It’s my belief that many of these shopping centre landlords carrying long-term vacancies have created these vacancies by charging excessive rents. They accept the fact that they are making losses in the short-term because they intend to use the vacancies to pressure the ACT Government into granting them a lease variation so they can cash in on the booming housing market. They would be particularly hopeful of doing this under a future Liberal government.
In my view, where the entire shopping centre has been vacant for some time the ACT Government should resume the lease.

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