With the restrictions on commercial rent arrears recovery (CRAR) and lease forfeitures now extended, the latest data indicates a slight fall in the number of tenants paying their March quarter commercial rent in full.
The Covid 19 Rent Collection Impact Report from Re-Leased / CREDIA, highlights the amount of rent paid at the 60-day mark for the March 2021 Quarter. This shows that 70% of all rents due were paid by this date. This figure is down 4% from the same point for the December 2020 quarter.
There has been a rise of 49% in the level of rent collected since the due date on 25th March. However, this is still a lower figure than the previous two quarters.
Caleb Dunn, Commercial Analyst at Re-Leased, commented: “Whilst we saw the biggest step so far in the UK’s roadmap out of covid restrictions just prior to day 60 of the March quarter, this progress has not yet been reflected in rental yields. Tenants continue to feel the pressure of fifteen months of disruption, and confidence and financial stability remain uncertain.
“There are however some promising signals the economy is responding to both the vaccine programme and non-essential retail opening back up.”
Retail sector is still the hardest hit
Retail properties remain the hardest hit by the decrease in commercial rent collections since the start of the coronavirus restrictions. Overall, rent collection for the retail sector is down 17% on last year’s levels.
Even though footfall and sales have started to recover, landlords received just 67% of the rent due by the 60-day point. This was slightly down on the same point for the December quarter and a fall from 72% for September. As a comparison, for the December 2019 quarter landlords had received 84% of rent by the day 60 mark.
On the March 2021 due date, only 15% of rent was received by retail landlords. This rose to 51% by day 14 and 52% by day 21.
Industrial properties see fall in March quarter commercial rent collection
The industrial sector had seen some resilience during the Covid-19 pandemic. However, for the current quarter, rent collection was down by 7%. When compared to the same point in the December 2019 quarter, there has been a 16% drop in rent collection for the sector.
At the 60-day mark for the March quarter, 74% of all rent due had been collected by landlords. This was an increase from 26% on the due date and 61% by day 21. However, it is a fall from 81% at the same point in the previous quarter and 79% for the September quarter.
Slight increase in collection rates for office market
The office sector remains the best performing market. At the 60-day point for the March quarter, there was a slight increase in office commercial rent collected, compared to the same period in the December quarter. It is also the closest to pre-pandemic levels of all the classes, with just a 3% fall compared to the same point in the December 2019 quarter.
By day 60 for this quarter, 79% of all office rent had been received by landlords. This was a rise from 28% on the due date and 67% at day 21. Compared with the same period in the December 2020 quarter, rent collection levels were up 3%.
Rent relief continues to fall
One of the signs of recovery in the commercial property market is the decrease in the number of credit notes being issued. Across all sectors, this fell from 5.9% at the day 60 mark for the September 2020 quarter, to 4.3% for the same period in the current quarter.
Maybe surprisingly, the retail market saw the lowest percentage of credit notes at day 60 for the March 2021 quarter. This was just 3.4%, compared to 4.6% of the industrial sector and 5.4% for the office market.
Caleb Dunn continues: “The pandemic has been a huge instigator for change in the real estate industry. Over one-year on from the outset of the pandemic, our data is showing that credit notes are continuing to fall following the peak in September. The office sector has seen the most significant drop in rent credited since this time last quarter.”