Payments from business occupiers rose by 12.7% compared to June
Growing concerns regarding the ability of some investors to make loan repayments
Hard core of business occupiers continue to not pay their rent
Over 50% of rent due from commercial property occupiers was collected on the September Quarter Day, according to the latest research by Remit Consulting, representing an increase of 12.7% compared to the previous quarter and higher than many industry insiders had feared.
The reconciled data, published by Remit Consulting for the September Quarter Day collection figures reveals that, overall, 50.5% of the rent due, and 44.4% of service charge payments were collected on last week's due date, compared to 37.8% and 33.0% respectively on the June Quarter Day.
Working 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), Remit Consulting has been analysing the collection of rent and service charge payments by the country's largest property management firms representing many of the main pension funds, REITS and other institutional investors, since the start of lockdown. The research covers around 125,000 leases on over 31,000 prime commercial property investment properties across the country.
When compared with the June Quarter Day figures, Remit Consulting’s research shows that the collection of rent from retailers rose by 11.8%, those in the industrial sector rose by 17.3%, and office occupiers by 12%. The collection of rent from occupiers of leisure properties increased by just 5.7%.
Commenting of the research, Steph Yates, a senior consultant at Remit Consulting, said: “The increase in rent and service charge payments is welcome news, and while the figures for September Quarter Day are certainly not as bad as had been feared by many property and asset managers, the crisis is far from over.
“There is a growing unease among property owners and asset managers regarding the repayment of loans secured against buildings. Some investors are raising concerns that the drop in income is going to seriously affect the loan repayments they are capable of making. The impact of this could be catastrophic for more highly leveraged businesses.
“The latest collection rates are fairly similar to those recorded at the beginning of lockdown, which were significantly lower than the same period in 2019, and investors are monitoring the situation closely and are increasingly requesting detailed updates on a daily or weekly basis.
“We calculate that, over the last six-months, there has been a shortfall in rents collected by pension funds, REITS, institutions and other commercial property landlords in excess of £3 billion. Despite the improved figures for September Quarter Day, we still expect a further, significant shortfall this quarter,” she added.
Melanie Leech, chief executive of the British Property Federation commented: “While the majority of property owners and tenants are working well together to navigate this pandemic’s economic impact, the Remit Consulting figures suggest that well-capitalised businesses who have been refusing to pay rent, or engage with property owners, have not heeded Ministers’ reminder that those who can pay their rental debts should do so. This is incredibly frustrating and undermines both support for those businesses in genuine distress and future investment for our towns and cities.”
Paul Bagust, RICS Global Property Standards Director, said: “It’s essential that landlords and tenants from businesses big and small continue to work with each other to agree on how rents and service charges can be paid to ensure as many as possible survive and then thrive, which benefits us all”.
Vivienne King, Chief Executive at Revo, said: “ Whilst it is positive to see this moving in the right direction, it is clear that while the moratoria are in place we are going to continue to see huge shortfalls in rent paid, which is simply not sustainable. The pressure is mounting on property owners who are singled out to bear billions in lost income which poses a systemic risk that impacts us all.
“We need a clear direction from Government as to how we will transition out of this distorted situation where contractual arrangements are effectively being disregarded, and more pressure must be applied to those large well-capitalised businesses that are choosing not to pay.”
