Real Estate investors and the VAT increase: a non event?

The great thing about value added tax (VAT) is that, unlike other taxes, for many involved in business the tax represents a cash flow issue as opposed to a hard cost.  The ability to offset input tax against output tax and recover your VAT means that for those providing B-2-B services the impact of the VAT rise on them and their customers is significantly more limited.
On the face of it the commercial real estate market should be similarly protected.  After all, once a property has been opted to tax the owner can charge VAT to its tenants and recover its VAT that it incurs from its suppliers.
But, as always with tax, the position is not quite so simple.
First of all it is not always possible to opt to tax and, in some cases, an option to tax can be disapplied.  Where this happens the owner of the property may not be able to recover its VAT costs relating to the building and where it has claimed it may be forced to pay the monies back to HMRC.
Secondly, there are certain classes of business that cannot recover VAT.  From the city perspective the one encountered most often is financial institutions.  This is a significant issue since for these class of tenants any VAT on the rent is a hard cost and not a mere cash flow issue.  Therefore before deciding whether to opt to tax a property (if the choice exists) it is important to consider what sort of tenant you are targeting.  In a mixed use scenario this can be quite complicated and you need to balance all the drivers before making a decision.
Another reason the VAT position will affect property is because stamp duty land tax is calculated on the VAT inclusive consideration.  So where a property is being acquired and it is not a transfer of a going concern (TOGC) SDLT will be calculated on the price plus VAT.  In that scenario the effect of the 2.5% increase in VAT is an additional SDLT liability.  In the lease context the effect is larger since you are considering the NPV of all future rental payments including the VAT element.  In both cases it does not matter that the buyer/tenant can recover the VAT.
So whilst the increase in the VAT rate on the face of it might not seem that important in the real estate context when you look at it in a bit more detail you realise that getting your VAT decisions right at the outset could have a significant effect on the financial performance of your real estate assets over the long term.