The Covid-19 pandemic has had a considerable impact on commercial rent payments. The Commercial Real Estate (CREDIA) Index for August shows that across the sectors, 47% of rent had been paid within 30 days of the due date.
The latest index highlights the first positive signs of recovery in the UK’s commercial property market. With the government’s restrictions remaining in place for landlords to collect commercial rent arrears, many have seen a fall in their income over the past six months.
Retail sector performing well
Despite the heavy effect felt on the retail industry by the coronavirus lockdown restrictions, the market is performing better than others in terms of rental payments. Over 57% of rent had been paid by retail tenants within 30 days of being due, which is an increase of 2% compared to the month before.
Overall, there was a 10% fall in rental payments within the first 30 days, with only 47% paid by this point. The office sector saw a 31% fall compared to July, where only 33.5% of rent was paid by the 30-day point.
Industrial properties saw a 5% decrease in rental payments, with 51% being paid within 30 days of the due date.
Landlord subsidies levelling out
At the height of the pandemic, there was a greater need for landlord subsidies from tenants. This could include negotiations for rent-free periods, a change to monthly rental payments or an agreement on when the arrears will be cleared.
According to the CREDIA Index, the level of landlord subsidies for August across the whole market fell slightly to just 0.6%.
Coronavirus commercial rent restrictions
When the UK government first announced the nationwide lockdown in March, they provided support for commercial tenants. This included a moratorium on lease forfeitures (evictions) and increased the amount of rent that needed to be due for the rent arrears process to start to 90 days.
With many tenants still suffering from the lockdown restrictions, the mortarium was extended in June to September 30th 2020. The government also increased the amount of rent due to 189 days for landlords to start the collection process.
Whilst many commercial tenants have continued to pay their rent in full and on time where they can, there have been a number of high-profile brands who have worked the system in their favour. This is preventing landlords from providing the appropriate support for those tenants who are genuinely having financial difficulties.
The government is facing increasing pressure from a number of areas to extend the current coronavirus measures preventing tenants from being evicted. There could be an announcement later in the week on any changes or extensions.
Supporting commercial landlords
At CEA Limited, we are continuing to provide support and assistance for both commercial landlords and their tenants. We will work with your tenants to arrange payment plans and discuss their ability to pay.
If you have more than 189 days of rent due from a tenant, we can start the Commercial Rent Arrears Recovery (CRAR) process. For more information on how we will help you, contact our commercial property team today on 0113 532 8350 or email office@cealimited.co.uk.
More information:
June quarter commercial rent collections continue to increase
BPF calls for end to commercial rent collection restrictions