Owners of vacant but valuable CBD buildings to be hit in rates sting

As office vacancy rates hit new heights, Adelaide City Council is considering a change to rate calculation, based on the value of property – not the rentable value. Do you support this move?

Adelaide City Councillors are deliberating a crucial change to rate calculations which would hit the commercial property sector.

Matching suburban councils, the change has alarmed the commercial property sector because rates would be charged according to the capital value of the property not the rentable value which has been slashed in recent years.

The current rentable value protects commercial property owners who struggle to find tenants for many run-down properties.

In another change, the owners of vacant land — residential or commercial — could be hit by higher rates than built-on land to encourage sales or development.

The ideas have been floated at closed ACC Budget workshops, and are in the agenda for a Committee meeting on Tuesday night.

Adelaide City Councillor Mary Couros. Picture: Claudio Rashella

Cr Mary Couros said ratepayers should be very wary of the idea.

“Changing the city’s rating method could have a huge impact on how much local businesses and residents pay,’’ she said.

“Given the skyrocketing cost of living, our council should be looking to shield our community and not add to cost pressures.”

The council administration notes the idea in the minutes of Tuesday night’s finance committee meeting, but suggests there be no change for 2023/24.

The Advertiser revealed last week Lord Mayor Jane Lomax-Smith has a bold agenda to revive CBD housing, resident numbers and commercial properties using “levers” council has available.

Lord Mayor Jane Lomax-Smith said she had not raised the issue but that “some councillors may be interested in reviewing options”.

An Adelaide City Council spokesman said the issue was a discussion point only.

The Advertiser understands council hopes to increase revenue from $227 million to around $250 million, which could force up rates.

A Polites sign on a largely vacant building in the CBD.

Property Council of Australia SA director Bruce Djite said the change could mean an “increase in rates by stealth”.

“Landlords have suffered a material reduction in their effective rent as they supported tenants to stay afloat throughout Covid-19,” he said.

“The CBD has endured years of Covid restrictions, a significant decrease in foot traffic due to the working from home trend, and currently has the highest office vacancy rate in the country making the timing of this proposed change very concerning.

“The Council needs to be transparent as the Annual Assessed Value (AAV) method has been in place for a significant amount of time in the Adelaide City Council area and most importantly it works.”

The Adelaide CBD office market vacancy rate increased from 14.2 to 16.1 per cent – currently the highest in the nation.