The coronavirus lockdown restrictions have caused financial difficulties for many businesses and led to a decline in the amount of commercial rent paid on time. The latest data from the REMark Report for the March 2021 quarter shows that office rent collection remains strong but that the retail sector is lagging behind.
Retail and leisure hit hardest by lockdowns
For the latest quarter’s rent, only 42% of retail tenants paid on time, with 51% received by landlords during the first seven days. These figures are slightly down from the previous two quarters and show the strain that the third UK lockdown has had on retail businesses.
The REMark Report from Remit Consulting highlights that rent collection rates in March were even lower for leisure businesses. Across the sector, just 23% of tenants paid on time, with this increasing to 34% by day seven.
The office and industrial sectors have seen more of a marked upturn in rent collection over the past two quarters. However, the rates for March 2021 fell in both areas.
In the office market, the rent paid on the March quarter day was 63%: compared to 71% for December and 65% for September. The industrial sector saw 58% of rent collected on time, down from 62% and 60% for December and September 2020. By day seven, this had increased to 79% for offices and 75% for industrial properties.
Steph Yates, senior consultant at Remit Consulting, commented: “Although the amount of rent and service charges collected on the due date was one of the lowest figures for a Quarter Day over the past year, we recorded a small recovery in the rate of payments over the first week of the Quarter and reached very similar levels to those experienced previously during the pandemic.
“While, on the face of it, this is good news and the trajectory of collection rates appears to be in line with those experienced over the past year, we should not forget that this ‘new normal’ is still around 30% lower than in a typical, pre-Covid, Quarter and that investors and property owners have seen a shortfall of over £5 billion since the start of the lockdown restrictions in March 2020. This equates to £1 in every £6 of rent due going unpaid.”
Commercial landlord figures
Across some of the country’s largest commercial property landlords, their collection rates tend to mirror the national figures.
For the March quarter, Great Portland Estates has collected 82% of all rent owed – 90% from office rent, but just 44% from their retail tenants.
Three-quarters of the rent owed was collected by British Land – 96% of the total office rent due and 54% of the retail rent.
Landsec received just 67% of the rent they were owed by tenants for the March quarter. This includes 86% of the office rent, but only 47% of London and 36% of the regional retail rents.
The coronavirus pandemic has increased the number of tenants paying their rent monthly, as opposed to quarterly. This could be a longer-term change, as businesses attempt to secure their financial position following the lockdowns.
Laura Andrews of Remit Consulting commented: “Over the past twelve months, many tenants and landlords have agreed on concessions and revised payment plans. Such agreements have seen an increase in the number of business occupiers paying rent monthly, and it remains to be seen if this will become a common feature of leases on commercial property in the future.”
Support for commercial property landlords
At CEA Limited, we have worked with a number of commercial property landlords throughout the Covid-19 restrictions. This includes managing their expectations, negotiating with tenants and encouraging rent to be paid on time where possible.
For more information on the support available, contact our commercial property team on 0113 532 8350 or email office@cealimited.co.uk.
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