Tax and Occupancy of Business Properties: Theory and Evidence from UK Business Rates

Ben Lockwood, Martin Simmler and Eddy H. F. Tam
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Ben Lockwood: University of Warwick and Oxford University Centre for Business Taxation
Martin Simmler: Oxford University Centre for Business Taxation and Thuenen Institute of Rural Economics
Eddy H. F. Tam: King’s College London and Oxford University Centre for Business Taxation

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We study the impact of commercial property taxation on vacancy rates and rents in the UK, using a new data-set, and exploiting exogenous variations in property tax rates from reliefs in the UK system: small business rate relief (SBRR), retail relief and empty property relief. We estimate that the retail relief reduces vacancies by 85%, and SBRR relief by up to 49%, while empty property exemption increases them by up to 89%. The effect of retail relief on clusters of urban properties (the High St) is no different to its overall effect. SBRR increases (decreases) the likelihood that a property is occupied by a small (large) business. We also use data on asking prices for rental properties to study the effect of reliefs on rental rates. Rental rates move in the opposite direction to vacancy rates, except in the case of empty property relief. All these findings are consistent with a novel model of directed search in the commercial property market, also presented in the paper.

Keywords: Commercial Property, Vacancy, Occupancy, Property Taxation JEL Codes: H25; H32; R30; R38 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eur, nep-pbe, nep-pub and nep-ure
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https://warwick.ac.uk/fac/soc/economics/research/c ... tions/wp648.2022.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:648

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