UK commercial landlords facing further significant losses due to shortfall in rent payments
Despite the recent easing of Covid-19 restrictions, the UK’s commercial property market appears to be heading for a further significant shortfall in rent collection over the current fiscal quarter, according to the most recent study of rent and service collection rates published by Remit Consulting.
The firm’s REMark Report figures for the percentages of rent and service charge payments reveal that overall, 21 days after March Quarter Day (25th March) due date, 67.3 per cent of the rent and 64.7 per cent of service charge payments were collected by landlords of commercial properties and property managers.
“These figures are almost identical to those seen 12-months ago, at the start of the first national Lockdown, and those for the September and December quarters,” says Laura Andrews of Remit Consulting.
“If the collection rates continue on the same trajectory, then the market is on course for a further substantial shortfall in income this quarter and the figures remain about 30 per cent below those experienced in the equivalent, pre-Covid, Quarter of 2019 and the scale of any shortfall at the end of the current three-month period is important as it coincides with the end of the Government’s moratorium on evictions for non-payment of rent,” she added.
Remit Consulting’s research indicates that there is still a hard-core of tenants who are choosing not to pay the rent and service charges that they owe. Over the past 12-months Investors and property owners, which include many pension funds and other institutions have seen a shortfall of over GBP5 billion which, according to Remit Consulting, equates to GBP1 in every GBP6 of rent due, going unpaid.
“The property management firms who are part of this study indicate that the majority of businesses that genuinely cannot pay their rent and service charges because of Covid-19 have already reached some form of a compromise deal with their landlords. We are concerned that there remains a hard-core of occupiers who are choosing not to pay and that they are responsible for much of the shortfall in landlords’ incomes at the end of each quarter,” says Laura Andrews
The REMark figures do provide some hopeful news in that the collection of rent due on High Street retail properties were 21.0 per cent higher than at the equivalent period of the December Quarter.
Andrews adds: “While there is a glimmer of hope on the High Street, we have to remember that this improvement comes from a very low starting point and that, three weeks after they were due to be paid, just 57.8 per cent of all retail rents have been received. Over the same period, the collection rates for leisure properties, such as pubs, restaurants and hotels fell slightly in comparison to the previous quarter.”
During the Covid-19 pandemic, Remit Consulting has worked in conjunction with the British Property Federation (BPF), the RICS, Revo, the Agent's Advisory Group, and other members of the Property Industry Alliance (PIA), analysing the collection of rent and service charge payments by the country's largest property management firms.