Projections suggest another shortfall in commercial property rents for the June Quarter, similar to the £1.5 billion estimated to have been unpaid in the previous quarter.
Institutional investors, asset managers and landlords of commercial properties are bracing themselves for another substantial shortfall in income, according to the latest research by Remit Consulting, which suggests that the UK property market is on track for a further major shortfall this quarter of similar proportions to the £1.5 billion pounds that was not paid by tenants during the three-months following March Quarter Day.
Working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Agents Advisory Group and other members of the Property Industry Alliance (PIA), Remit Consulting’s ongoing study into the amount of rent and service charge collected by managing agents and self-managed funds and is based on the reconciled figures for rent and service charge payments recorded as part of their reporting processes to many of the main pension funds, REITS and other institutional investors. The study covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.
The latest confirmed figures for collection rates of rent and service charge payments since June Quarter Day show that they are on the same trajectory as in the previous quarter, with the overall collection of rent after 21-days 8% lower, at 59 %, compared to 67% three months ago. In March 2019 collection rates for rent were around 97% after 21-days.
Steph Yates, a senior consultant at Remit Consulting, said: “Based on the IPF’s figures for the total value of property investments in the UK, the percentage of rent collected and recorded for our survey revealed a shortfall to the UK’s property sector of £1.5 billion for the March quarter. With the overall collection of rents due on June Quarter Day down by 11% on the March figures, and the rate of increase closely mirroring the figures from three months ago, our projections suggest that the industry could be facing another major shortfall of income this quarter.
“At the end of the previous quarter, the shortfall in rent payments was about 18% overall. After 21-days of this quarter, the overall collection figure was already 8% lower that at the same stage three months ago. Unfortunately, the projections for the remainder of this quarter will bring little comfort to investors and asset managers.
“At some stage this lost income will have to be written off, to the detriment of the annual returns for pension funds, insurance businesses, REITS and other investments. This will then begin to impact the incomes of large parts of the population and the wider economy,” she added.
Property owners in the retail and leisure sectors were, once again, the hardest hit with less than half of rent and service charge payments having been made three weeks after the June Quarter Day due date.
Paul Bagust, RICS Global Property Standards Director, said: “These new figures confirm that the effects of the COVID-19 pandemic are being felt very deeply. The current position places a huge burden on all parties − occupiers, owners and managing agents. It is critical that all parties work together flexibly to recognise these challenges and create an approach that’s proportionate and appropriate for each set of unique circumstances.”
Vivienne King, Chief Executive at Revo, added: “June Quarter Day has left property owners with a staggering £1.5 billion shortfall, with the loss of income most severe in the retail property sector. As we move past the quarter day the prospects of collecting any further rent is likely to reduce, with repercussions for owners, their lenders as well as the pension funds and savers who trustingly place their savings directly or indirectly in retail property. Government must re-examine how it can provide support for the retail sector, which is integral to economic recovery and the Chancellor’s pledge to protect jobs.”
Quarterly Rent Collection
