Property giants ask Clegg for help to revive town centres

New financing and tax model urged after cautious banks fail to fund development

The UK's top property companies have called on the Deputy Prime Minister, Nick Clegg, to introduce a tax scheme to start development in deteriorating town centres.

The property industry wants to improve urban centres across the UK, something the Government has been keen to address after the recession led to boarded-up, empty shops in the high street. But funding for new development has been difficult to secure from cautious banks.

A group of FTSE 100 and global property giants, including Land Securities, Hammerson, Westfield, Lend Lease and Grosvenor, wrote to Mr Clegg last week calling for the introduction of a new financing model.

In association with the retail property organisation BCSC, the companies have called for the introduction of a developer-led local tax re-investment programme. This would allow the private sector to lead economic growth, potentially unlocking up to 50m sq ft of stalled retail developments in the UK.

Based on the US's tax increment funding model, the programme would allow projected increases in business rates revenue created by new development to be used to secure private sector investment in public infrastructure. This can include anything from car parks, sewers and public spaces to theatres, courts and police stations.

Richard Akers, the BCSC president and managing director for retail at Land Securities, said: "This letter sends a clear message that some of the largest developers in the country are ready to start building again if he [Mr Clegg] can help deliver this model. In our view this development finance model responds perfectly to the Government's pro-development and private sector-led growth agenda.

"Retail provides three million jobs in the UK and adding retail property more than doubles this number. Clearly towns and cities in the UK continue to need inward investment and if ministers are prepared to show leadership on this issue they will get that from our sector."

Westfield, one of the signatories, is this week opening its largest shopping centre yet, the £1.45bn 1.9 m sq ft retail and leisure Westfield Stratford City. It has built and owns a large number of UK town and city centre schemes and is currently seeking ways to revive its Bradford scheme.

Alistair Parker, a partner in development and planning at property consultancy Cushman & Wakefield, said: "In the current climate, the investment value of schemes is often insufficient for the private sector to fund both the costs of the schemes themselves and the associated public infrastructure works, either through investment capital funding, or short-term debt."

The Government says it wants to improve the UK high street. In May the coalition hired retail's television star, Mary Portas, to carry out a review with the aim of breathing new life into the high street.

Last week, the Local Data Company revealed that many UK towns and cities were still suffering from a large number of shop vacancies. Margate in Kent had a 36.1 vacancy rate and Dudley in the Midlands 29.4 per cent.

Some retail experts have blamed new developments for blighting existing shopping areas, but property companies argue that older buildings are often not the right size or in the right location for retailers and are impossible to let in their current state.

The British Property Federation has been calling for the planning rules around change of use to be eased so that obsolete retail and commercial property can be redeveloped into much needed homes.