Industrial landlord O&H Q7, which is facing a bill of more than £150,000 a year, today confirmed it had started bulldozing a fifth of its Alexandra Business Park, in Pallion, less than a week after it gave the go-ahead to knock down a further 37,000ft of the 750,000ft site.

Before April this year, owners of commercial property received tax relief if their properties were empty. Industrial space got total relief, while shops and offices received half.

Malcolm Holmes, agency associate director at GL Hearn, which advised O&H Q7 on the restructuring of the Alexandra Business Park, said: "The rateable value of the units demolished would have incurred a cost of well over £150,000 per year to our clients, a cost that until then had not been necessary.

"In demolishing these factory units, we have undoubtedly lost some major assets not just as far as our client is concerned but also as in respect of the City of Sunderland."

Mr Holmes said that the units were not at the end of their productive life and that similar buildings on the estate have been in use for the last 10 years, keeping businesses in the city.

"They will never be built again in this style," he said.

Last month, Chris Mullin, Labour MP for Sunderland South, began the debate on the controversial move when he warned that local businesses faced bankruptcy as a result of the tax changes.

And Labour's MP for Halifax, Linda Riordan, has received the support of 35 MPs for an Early Day Motion to reintroduce empty property tax relief.

The British Property Federation (BPF) is also calling for the tax to be scrapped and has launched a support service for those affected by the changes.

It argues that small businesses in some of the country's most deprived areas will feel the full force of the changes.

Peter Cosmetatos, finance director at the BPF, said: "The result will be a slowdown in the regeneration of deprived areas and higher rents when demand begins to recover.

"This is an ill-conceived move that is hurting regeneration and reducing the supply of affordable property that is essential for business.

"Empty rates contradict not only the Government's supposed commitment to delivering sustainable communities but its promise to support business."

The Government says it is working with the Local Government Association, the Valuation Office Agency and the Institute of Revenues Rating and Valuation to monitor the impact of the reforms.

A Treasury spokesman said: "Reforms to empty property relief are aimed at ensuring a fair balance between incentives to re-let property, and giving property owners a period of relief while they manage vacancies."

Sunderland Council has also pledged to support local businesses.

George Blyth, Senior Assistant Treasurer, said the council notified businesses about the changes six months before they came into effect, and had kept Mr Mullin informed.

"There is no immediate impact on council finances, as although business rates are collected locally, the money is paid into a central national pool, which is redistributed as part of the annual Local Government Finance Settlement," he said.