During fiscal 2015/16, the total output value of this sector of the industry was £253m, down from £543m the previous year.
At just £46m, quarterly private industrial output during the first three months of 2016 was at its lowest level since the first quarter of 1987.
The Scottish Building Federation and the Scottish Property Federation attribute the decline to changes to empty property rates relief for industrial property, which came into force on 1st April 2016.
Empty industrial properties previously received 100% relief from business rates as long as they were vacant, but now this only applies for the first six months that a property is vacant. After this period, empty industrial properties will receive just 10% relief from business rates.
Scottish Building Federation managing director Vaughan Hart said: “We’ve raised concerns for some time about an over-reliance by the Scottish construction industry on major infrastructure projects as the leading source of new work and output. These new figures suggest changes to rates relief are having a major impact on output from the private industrial sector of the industry which will only further exacerbate this problem. We fully support industry calls to reverse the new policy on rates relief so the industrial property market can recover, generating more new work for our members.”
Scottish Property Federation director David Melhuish added: “The recent figures for new construction orders for the industrial sector are a major concern. The consequence for the development sector of paying 90% rates soon after a building comes to market is that cash flow is hit, adding substantial risk for the investor and deterring projects or reducing their scale. This will reduce the amount of industrial space as older properties are demolished or withdrawn from the market putting more pressure on the space left in use to pay rates and to sustain or grow our business infrastructure.”