REMIT CONSULTING WARNS COMMERCIAL PROPERTY INVESTORS TO EXPECT A 20% SHORTFALL IN RENT COLLECTION THIS QUARTER

• Collection rates still no better than at the start of the pandemic

• Fears grow among investors, property and asset managers over tenants’ bad debts
  and the threat of CVAs

The collection of the rent due on commercial properties in the UK is continuing to mirror those witnessed in the early stages of the pandemic, according to the latest research from Remit Consulting which projects a further shortfall for investors of around 20% at the end of the current Quarter. 

The study relates to the collection of rent and service charge payments by 3rd of November, 35-days after the September Quarter Day and two-days before the start of the second national lockdown. The firm’s analysis of rent and service charges collected shows that, five weeks after the September Quarter Day due date, 72.7% of the rent on commercial properties had been collected overall, along with 69.8% of service charge payments.  

At the same stage in the March Quarter this year, 74% of rents had been collected and 63% of service charge payments had been received. 

Steph Yates, senior consultant at Remit Consulting, said: "It is evident that the stricter restrictions and limitations that had been imposed by the Government in some parts of the UK earlier in the Quarter, and the expectation of a national lockdown had little impact on the ability or willingness of business occupiers to pay their rent.  

“Seemingly, the propensity of tenants to pay what they owe is not influenced by the level of the restrictions placed upon the population. While the full impact of the second national lockdown on rent and service charge payments remains to be seen, landlords and property managers are concerned, particularly with regard to the retail and leisure sectors. 

“The trajectory for the rest of this quarter indicates a further substantial shortfall of approximately £1.5 billion can be expected by landlords and investors by the end of next month. We have previously calculated that, over the first six months of the pandemic restrictions, the cost to pension funds, rates, institutions and other commercial property landlords was in excess of £3 billion.  These shortfalls effectively become treated as bad debts, meaning that, by the end of the year, landlords could be facing a total deficit in rent alone of up to £4.5 billion.” 

The shortfall in terms of the service charges owed by businesses on the properties they occupy is also outlined in Remit Consulting’s research.  These costs cover building maintenance, insurance, security and cleaning, etc.  The Government’s moratorium on pursuing unpaid rent through the courts during the pandemic does not cover the payment of service charges and the non-payment of these costs by tenants adds further pressure to landlord and tenant relationships. 

“The extension of the Government’s moratorium on forfeiture for non-payment of rents by tenants of commercial properties in August eased the prospect of Company Voluntary Arrangements (CVAs) being exercised by business occupiers unable, or unwilling, to pay their debts. As the quarter progresses there are growing concerns with property managers, asset managers and investors that mass CVAs within the market could become a reality. 

“In addition, there is a growing unease among investors concerning the impact that the drop in income could have on their ability to meet repayments on loans secured against properties. The impact of this could be disastrous for more highly leveraged businesses,” added Steph Yates. 

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 since the start of lockdown. The research covers around 125,000 leases on over 31,000 prime commercial property investment properties across the country. 

TIGHTENING OF COVID-19 RESTRICTIONS SEES A SLOWING IN COLLECTION OF COMMERCIAL PROPERTY RENTS ACCORDING TO REMIT CONSULTING

• September collection rates mirroring those seen in earlier stages of UK lockdown

• Fears grow among investors, property and asset managers over tenants’ bad debts
  and the threat of CVAs

The collection of the rent due on commercial properties in the UK slowed slightly in recent weeks and is mirroring the rate of increase witnessed earlier in lockdown, according to the latest research from Remit Consulting. 

The analysis reveals that overall, 21-days after they were due to be paid on the September Quarter Day, 67.8% of rent had been collected along with 65.3% of service charge payments. By comparison, after 21-days in the March Quarter 67% of rents had been collected and 56% of service charge payments had been received. 

Steph Yates, senior consultant at Remit Consulting, said: "The latest figures come after the introduction of tighter Covid-19 restrictions on large parts of the country. What we are seeing is that the rate of rent collection from business occupiers has slowed but continues to follow a similar pattern to the previous two Quarters.  

“However, both the March and June Quarters saw a substantial shortfall for landlords and investors and we previously calculated that, over the first six months of the pandemic restrictions, the cost to pension funds, rates, institutions and other commercial property landlords was in excess of £3 billion. With the current rate of collection, we can reasonably expect a further shortfall of approximately £1.5 billion at the end of this Quarter. 

“At the end of each Quarter these costs effectively become treated as bad debts, meaning that, by the end of the year, landlords could be facing a total shortfall in rent of up to £4.5 billion. 

“Before the Government’s last extension to the moratorium on rent payments, we understand there were reports of CVAs (Company Voluntary Arrangements) being prepared by business occupiers who were unable, or unwilling, to pay their debts.  While the extension of the Government’s moratorium announced in August removed this immediate threat, there is a growing concern among property managers, asset managers and investors that the prospect of mass CVAs could become a reality.”  

“This could prove disastrous for the property sector and the institutional investors that rely on the income from real estate to help fund pensions, insurance payments and savings,” she added.  

Remit Consulting’s research also highlights the shortfall in terms of the service charges owed by businesses on the properties they occupy.  These costs include items such as building maintenance, insurance, staff costs, security and cleaning.   

“The payment of service charges is not covered by the Government’s moratorium on pursuing unpaid rent through the courts during the pandemic, and the non-payment of these costs by business occupiers can only add further strain to the relationships between landlords and tenants,” said Steph Yates. 

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 since the start of lockdown. The research covers around 125,000 leases on over 31,000 prime commercial property investment properties across the country. 

LATEST RESEARCH FROM REMIT CONSULTING REVEALS INCREASED COLLECTION OF COMMERCIAL PROPERTY RENTS

• 62% of rents due from business occupiers over the first seven days of the quarter

• 12% increase compared to same stage in previous quarter

• Remit Consulting’s research suggests better landlord and tenant cooperation

• Leisure and hospitality sector continues to struggle with rent payments

The overall collection of commercial property rents in the UK, a week after they were due to be paid on the September Quarter Day was almost 12% higher than the figure recorded in the previous quarter, according to the latest research by Remit Consulting.

The reconciled data, published by Remit Consulting in its latest REMark Report, reveals that seven days after rents were due, overall, 62.0% of rents due on commercial properties had been collected, almost 12% higher than in June and just over 5% higher than the figure witnessed at the same point in the March quarter.

The figures for service charge collections show that 56.3% of service charge payments had been received seven days after the September due date.

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.

Steph Yates, senior consultant at Remit Consulting, said: "While the figures relate to the period before the latest Government announcement regarding its three tier lockdown measures, the figures suggest a growing confidence among commercial property tenants and it is evident that landlords and tenants are cooperating to meet the challenges of the pandemic. There is also evidence that landlords are working closely with smaller tenants to make sure that they survive the ongoing crisis.

“This will be particularly important in the leisure and hospitality sector, which has by far the lowest collection rates,” she added.

Remit Consulting has calculated that over the first six months of the pandemic restrictions, there was a shortfall in rents collected by pension funds, rates, institutions and other commercial property landlords in excess of £3 billion. Despite the improved figures for the September quarter, the management consultancy expects the shortfall to continue to rise towards the end of the year.

COLLECTION FIGURES REVEAL THAT OVER 50% OF COMMERCIAL PROPERTY RENTS WERE PAID ON SEPTEMBER QUARTER DAY

• 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.”

£3 BILLION MISSING FROM UK’S PROPERTY INVESTMENT MARKET SINCE START OF LOCKDOWN

• Only 72.5% of rent due to landlords on commercial properties was received over the June Quarter

• Prospects for September Quarter “look bleak”

As quarterly rent demands begin to land on the desks of business occupiers, Remit Consulting reports that pension funds, institutions and other investors in the UK commercial property sector have experienced a further £1.5 billion shortfall in the collection of rent over the June Quarter. Remit’s research shows that, since the start of lockdown, over £3 billion in rental income has now been lost by property investors.

Working with the British Property Federation, RICS, PIA, Revo and other professional bodies, and based upon the analysis of 125,000 property leases, Remit Consulting has been studying the collection of rent and service charge payments by the UK’s biggest property management companies since the start of the Covid-19 lockdown in March.

“Our analysis of the verified figures for the total rent collected 90-days after the June Quarter Day by property managers reveals that, overall, just 72.5% of payments due on commercial properties were received investors in the UK market. This is 6.4% lower compared to the previous quarter,” said Steph Yates, senior consultant at Remit Consulting.

“Based on data from the IPF, regarding the total value of UK property investments, this equates to a shortfall in excess of £1.5 billion over the last three-months. On the basis of our previous research for the March Quarter, this means that the income of pension funds and other investors now totals over £3 billion so far during the pandemic.

“With the moratorium on forfeiture for non-payment of rents by tenants of commercial properties still in place, local lockdowns and with people being encouraged to work at home, it is hard to see that this situation will improve by the end of the year. The prospects are looking bleak and if the Prime Minister's suggestion that the current restrictions could be in place for six months, it may well be much longer,” she added.

Melanie Leech, Chief Executive, British Property Federation said: “It is disappointing to see that the total shortfall in unpaid commercial rents has simply doubled over the past two quarters. While for many recovery is still at risk and more support will be vital, we continue to see well-capitalised businesses taking advantage of Government interventions and refusing to pay rent. All signals are pointing towards a total of £4.5bn in unpaid rents by the end of December, which is too high a mountain for businesses and property owners to climb on their own.”

UK rent and service charge collection data (March Quarter Day 2020 +90 days)

Note: The below figures are commercial averages only.

THE PANDEMIC’S GROWING THREAT TO UK PENSIONS

While the former pensions minister, Steve Webb, warns in The Guardian that the UK’s ‘pensions lifeboat’ scheme is at risk from “a huge wave of corporate defaults” as a result of Covid-19, company collapses and corporate defaults are not the only threat to pensioner incomes caused by the pandemic.

Since the start of lockdown in the UK, Remit Consulting has been working alongside the RICS, BPF, and other industry leaders, to produce a regular analysis of rent and service charge collection levels. Based on the reconciled figures reported to investors by their managing agents the research has involved data regarding around 125,000 leases on 31,500 prime commercial property investments across the country. 

Using the IPF’s market size data, we calculated that the shortfall in the March quarter equated to £1.5 billion. As we head toward the end of the June quarter, with collection rates following a near-identical trajectory, there is a strong prospect for a similarly bad quarterly shortfall and an income loss to the industry of £3 billion since the outset of lockdown is more than plausible. 

This prospect is a big concern, as a fall in the income of the pension funds, REITS and other investors will inevitably hit the wider population. As The Guardian article highlights, the income of many pensioners and savers is reliant on the performance of these institutions.

To keep up to date with the latest data on rent collection and service charge collections during the pandemic, please visit the register for our newsletter or follow us on LinkedIn and Twitter.

IN THE NEWS: UK RENT AND COVID-19

A recent article published by the RICS regarding the challenges of rent collection in the UK during the COVID-19 pandemic and the varying picture across regions and asset types featured the thoughts on the situation from Remit Consulting’s Steph Yates. 

Steph is acknowledged as the industry expert on the topic as, over the last nine years, she has conducted the firm’s regular REMark Study which has researched rent and service charge collection along with other trends and issues within the UK's property management sector.   

Since March quarter day, Steph has been 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), recording the amount of rent and service charge collected by managing agents and self-managed funds.  The research is based on the reconciled figures for rent and service charge payments recorded as part of the reporting processes to pension funds, REITS and other institutional investors and covers around 125,000 leases on 31,500 prime commercial property investments nationwide.   

The following is an extract from the RICS article

“Since the start of lockdown Remit Consulting has worked alongside the RICS, BPF, and other industry leaders, to build on REMark, its rent and service charge collection survey that’s been running since 2010 – what observations have they drawn from their data during this period? 

“The data comes from 125,000 leases on 31,500 prime commercial property investments across the country and is based on consolidated figures from the largest managing agents, REITs and funds. 

“Our data showed that, following the government’s moratorium on re-entry or forfeiture of commercial leases for non-payment of rent, the rate of collection plateaued, with many tenants apparently choosing not to pay despite the introduction of the government’s Code of practice for the commercial property sector.   

“The research allowed RICS and other partners to keep the government informed about the crisis in the property sector, with up-to-date, accurate and verified information.  

“The latest data reveals that while the trajectory of the collection rates for the June Quarter is mirroring that witnessed during the March Quarter, initial collection levels have fallen and the shortfall this time looks likely to be even bigger than in March. 

“Using market size numbers from the IPF, we calculated that the shortfall for March equated to £1.5bn of lost rent across the whole property investment market, so a £3bn shortfall over the two quarters is quite plausible. This prospect is a big concern for pension funds and insurance companies, as a fall in their income will inevitably hit the wider population, many of who have finances that rely on these institutions. 

“In 2019, Remit Consulting’s RICS insight paper The use and value of commercial property data highlighted that the industry was already at a tipping point with regard to the exponential growth of real estate data. The pandemic has brought data analysis into sharp focus and confirms our industry’s need to develop data standards that are open-sourced and applicable globally.” 

Steph Yates, Remit Consulting

NEWS RELEASE: COLLECTION OF COMMERCIAL PROPERTY RENTS REMAIN LOWER THAN PREVIOUS QUARTER

Latest research from Remit Consulting indicates that investors are facing another significant shortfall this quarter 

 The UK’s property market is on course for more stormy waters as the collection rate of rent and service charges for commercial property continues to falter, according to the latest figures from Remit Consulting regarding the payments that were due on June Quarter Day. 

The data shows that, overall, 35 days after the due date just 63.3% of rents and 64% of service charge payments have been received from business occupiers.  The rate of collection of rent continues to mirror the pattern recorded in the previous quarter but remain around 10% lower and another significant shortfall at the end of the quarter looks likely.   

“We calculated that the loss to pension funds, REITS, and other institutional investors at the end of the previous quarter stood at £1.5 billion.  The trajectory of the current quarter gives no suggestion that investors will fare any better this time around," said Steph Yates, senior consultant at Remit Consulting. 

“It was hoped, with anecdotal evidence of landlords and tenants agreeing monthly payment plans, that there might have been a noticeable increase in rent payments. This should have been evident in the figures for collection at 35 days, but there is no sign of this. With the moratorium on forfeiture for non-payment of rent by tenants of commercial property still in place, there still appears to be a divide between those trying to pay what they owe and those choosing not to. 

“The moratorium remains in place until just after the next quarter day at the end of September and the government’s handling of this will be crucial to investors. With the inevitable backlog that will be faced by the courts, this is not a situation that is going to be resolved in the short-term,” she added. 

The retail and leisure sectors were, once again, the worst-performing asset types for the June +35 day figures with 50.5% of rents collected from retail occupiers and 41.3% from leisure occupiers. The Leisure sector has seen a doubling of rents collected since the June due date, possibly reflecting the easing of restrictions on the sector.  

Remit Consulting’s research also reveals that, for the first time since the REMark Report was undertaken in 2010, the overall collection of service charges was higher, at 64%, than that of rent. This may imply that both landlords and tenants are prioritising building maintenance and ‘keeping the lights on’ over rent. 

Since the beginning of lockdown in the UK, the management consultancy has been 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), recording the amount of rent and service charge collected by managing agents and self-managed funds. The research is based on the reconciled figures for rent and service charge payments recorded as part of the reporting processes to pension funds, REITS and other institutional investors and covers around 125,000 leases on 31,500 prime commercial property investments nationwide.  

NEWS RELEASE: INSTITUTIONAL INVESTORS AND COMMERCIAL PROPERTY LANDLORDS BRACING FOR ANOTHER MAJOR SHORTFALL IN RENTS

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

NEWS RELEASE:

OVER £1.5 BILLION MISSING FROM UK’S PROPERTY INVESTMENT MARKET OVER DURATION OF MARCH QUARTER 2020

Retailers accounted for over half of the rent unpaid 90-days after the March Quarter Day

Institutions and other investors in the UK property sector experienced a shortfall of over £1.5 billion in rental income over the March Quarter, with over half of the shortfall being due from the retail sector, according to the latest research by Remit Consulting.

Working with the British Property Federation, RICS, PIA, Revo and other professional bodies, and based upon the analysis of 125,000 property leases, Remit Consulting has been studying the collection of rent and service charge payments by the UK’s biggest property management companies since the start of the Covid-19 lockdown in March.

“...a shortfall of £1.5 billion over the three-month period with the retail sector accounting for £780 million of this total.”

— Steph Yates, Remit Consulting

“The finalised figures for the total rent collected 90-days after the March Quarter Day reveal that, overall, just 82% of payments due were received by institutions and other property investors in the UK market. Based on data from the IPF, regarding the total value of UK property investments, this equates to a shortfall of £1.5 billion over the three-month period with the retail sector accounting for £780 million of this total,” said Steph Yates, senior consultant at Remit Consulting.

“The data for the beginning of the current quarter shows that collection rates are on an almost identical trajectory. With average collection on the June due date over 11% lower than three months earlier, investments in the UK property could see an even bigger shortfall this quarter,” she added.

Melanie Leech, Chief Executive, British Property Federation said: “The pensions and savings funds invested in commercial property clearly cannot continue to sustain rental losses on this scale, fuelled by the Government moratorium on property owners’ rights of action which has encouraged well-capitalised businesses to ignore their rental obligations. Those who can pay should pay. Meanwhile for the hardest hit tenants forced to stop trading and unable to meet their rental debts, we continue to work with other property owner and occupier trade bodies to press government for support to help them with their fixed property costs.”

Phil Clark, Global Head of Real Assets Equity at Kames Capital, said: “The pandemic has created a shock that is still rippling through the economy and not surprisingly a number of commercial property tenants have seen revenues decline and are struggling to meet their rent obligations. This also has a direct impact on our clients who are pension funds. The majority of responsible tenants and investors are working together to find reasonable solutions for both parties but there is no avoiding the fact that some businesses simply won’t be able to pay and some pension funds will receive less income as a result.”

UK rent and service charge collection data (March Quarter Day 2020 +90 days)

Rent

Service Charge

NEWS RELEASE:

INSTITUTIONS AND OTHER INVESTORS FACING SUBSTANTIAL SHORTFALLS IN INCOME DUE TO NON PAYMENT OF RENTS AND SERVICE CHARGES ON COMMERCIAL PROPERTIES

• Research suggests that the projected shortfall in rent and service charge could be over £943million

Institutional investors and other landlords of commercial properties could be facing even bigger shortfalls in income in the current quarter compared to the first three months of the Covid-19 lockdown, according to the latest research by Remit Consulting.

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 reveals that collection rates since June Quarter Day closely resemble the pattern for the previous quarter, but starting from a lower level.

Steph Yates, a senior consultant at Remit Consulting, said: “The data suggests that the collection rates are on a similar trajectory to three months ago but with quarterly income at a lower level to begin with. Unless there is a significant upswing in payments across the board, it is feared that the situation for institutions and other investors could turn out to be worse than the previous quarter in terms of income levels.

“Based upon the 125,000 leases analysed, regarding 31,500 separate commercial properties, our research suggests that the pension funds and institutions involved could see a shortfall in their expected income of around £943 million by the end of the current quarter.'“

“The first seven days of the quarter indicates that the collection rates of rent and service charge closely resembled those recorded following March Quarter Day and that the percentage increases over the first week are very close to those seen previously.  In March, however, 49% of rents were collected on the due date, along with 37% of service charge payments. By comparison the respective figures were 37.8% and 33% for June Quarter Day.  Seven-days after the due date the overall figure for rent collected had risen to 50.7% and overall service charge payments had risen to 46.3%.”

Remit Consulting’s research is based on the reconciled figures for rent and service charge payments collected by the country’s largest property managers as part of their reporting processes to many of the main pension funds, REITS and other institutional investors.

Melanie Leech, Chief Executive, British Property Federation commented:  “It is disappointing to see rent and service charge collection continue to be depressed across all sectors as a result of the Government’s moratorium on property owners’ rights.

“We continue to work with other property owner and occupier trade bodies to press government for support to help businesses, forced by coronavirus to stop trading, with their fixed property costs. It remains essential however that all businesses who can pay their rent should do so, not only to avoid a mounting debt problem for the business itself but in order to protect the interests of the millions of people whose savings and pensions are invested in commercial property.”

Paul Bagust, RICS Global Property Standards Director, said: “The latest data shows that rent and service charge collection remains a significant issue across a range of asset classes. Given the importance of the commercial property sector to both the economic wellbeing of the country and all those spaces that define our everyday lives, its essential that landlords and tenants continue to work together to find common ground. RICS will continue to work with Government and industry to provide a long term solution.”

Bill Hughes, Head of LGIM Real Assets and Chair of the Property Industry Alliance, commented: “We welcome the Chancellors additional measures to support the hospitality industry in combatting the impact from Covid-19, amidst the ongoing crisis, and the recognition of the important role this sector and the construction industry both have to play in supporting UK jobs. 

“We would like to see this matched with greater support and fairness of treatment for landlords across all sectors, and the pension money that sits behind UK real estate, protecting this important source of long term investment in the built environment and our long term economic growth prospects.”

In the retail sector, seven-days after they were due, just 42.2% of the rent and 37.5% of service charges had been received, rising from 35.5% and 27.6% respectively. High Street retail witnessed the largest percentage increase in rent collection, with a 115% increase over the seven-day period, compared to just 113% increase for shopping centres.

In the leisure sector, the total rent collected from pubs, bars & restaurants rose from 7.3% to 13.6% (representing a 186% increase in collection). This was ahead of the lifting of the government’s restrictions on such properties opening and suggests that operators might have been optimistic about the prospects for their incomes ahead of reopening.

The biggest increase in rent payments was seen in the business and office park sector, where there was a 230% increase in payment of rents, which rose from 36.2% on the due date to 83.3% seven-days later.  The overall collection of rent for all offices rose to 71.2%, suggesting that office occupiers in town and city centres were more reluctant to pay their landlords on time.

NEWS RELEASE:

GOVERNMENT MORATORIUM ON COLLECTING LATE RENT CONTINUES TO DRIVE BEHAVIOUR OF MANY LARGER TENANTS IN RETAIL AND LEISURE SECTORS

·       Collection of rent and service charge for commercial property on June Quarter Day worse than previous quarter

The government’s moratorium on taking legal action against tenants is changing the behaviour of many commercial tenants according to research compiled by Remit Consulting that also shows the amount of rent and service charges collected for commercial properties on June Quarter Day were even lower than in the previous quarter.

The management consultancy, 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), surveyed the country’s largest property management firms representing many of the main pension funds, REITS and other institutional investors. The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

The reconciled figures reveal that, overall, 37.8% of rent and 33.0% of service charge payments were collected on last week’s due date.

By comparison, Remit Consulting’s previous research for March Quarter Day showed that, overall, 49% of rents were collected along with 37% of service charge payments at the beginning of the UK’s lockdown.  In 2019 the figures for March Quarter Day were 79% and 73% respectively.

The June Quarter Day research also reveals that 53% of retail properties and 63% of leisure properties across the investment portfolios studied are subject to rent concessions, holidays or renegotiations put in place since March.  The comparable figures for industrial and office properties are 27% and 17% respectively.

“While the collection figures are worse than the previous quarter, they are better than many property and asset managers were fearing,” said Steph Yates, a senior consultant at Remit Consulting. 

“The leisure and retail sectors are clearly the worst hit and it appears that it is the large tenants, across all the sectors, that are agreeing concessions more than the small ones. This is the opposite to what was intended in the government’s recently issued code of practice for the commercial property sector and the moratorium on pursuing remedies for late rent is having a significant effect on the market,” she added.

Melanie Leech, Chief Executive, British Property Federation commented: “We warned Government that extending their moratorium on evictions would have an impact on rent collection far beyond the retail, hospitality and leisure sectors at the sharp end of the Covid-19 pandemic and it is disappointing to see that borne out in these figures.

“Government must continue to reinforce the message that those businesses who can pay rent, should pay so that businesses in genuine distress can be helped within the framework of the new Code of Practice.” 

Chief executive of Revo, the Retail Property Community, Vivienne King said: “Rent collection will vary for each property owner, but an average of just 35% paid in the retail sector and 21% in the leisure sector underlines the severe and sudden loss of income, which will have deeper repercussions for lenders, pension funds and savers. The moratorium on statutory demands winding-up petitions and commercial evictions has exacerbated the problem of non-payment, making it very difficult to determine which operator businesses are in genuine distress and which are simply refusing to pay their rent, despite the Government’s Code of Practice.

“We recognise genuine distress exists and urgently call on the Government to provide financial support on rents to restore stability to the retail property ecosystem and secure an industry ready to support the UK’s economic recovery,” she added.

Bill Hughes, Head of LGIM Real Assets and Chair of the Property Industry Alliance, commented: “The decline in rent collected is directly related to the extended government moratorium on landlord rights. We now need to see fairness of treatment for the pensioners that back large swathes of the UK’s real estate.  By encouraging greater alignment between UK’s occupiers and the long term money backing its real estate, we can safeguard the support of long-term capital to invest across the built environment of the UK, including its regions, and support a productive and positive economic bounceback.” 

Paul Bagust, RICS Global Property Standards Director, said: “A flourishing commercial property market isn’t just important for the economic health of the country. By providing a home for everything from retail to hospitality to office space, it shapes our everyday environment and impacts on how we work, live and play. The recently launched Government Code of Practice will help landlords and tenants resolve some of their issues, but fundamentally we are going to have to start reimagining what our town and city centres will look like to ensure they remain the beating hearts of their communities and stay financially viable.”

June Quarter Day rent and service charge collection figures:

For further information, please contact Steph Yates of Remit Consulting:  steph.yates@remitconsulting.com

June Quarter Day 2020 – the perfect storm?

Lockdown restrictions might be easing in the UK but, for many business and residential tenants, Wednesday 24th June could prove to be a very bleak and possibly a ‘perfect storm’ in terms of landlord and tenant relationships.

Wednesday is, of course, the June Quarter Day when commercial tenants will be expected to pay their rent and service charge for the next three months and, despite the government extending the moratorium on landlords taking action against tenants for non-payment of rent until the end of September, this will be particularly difficult for those occupiers who have been unable or unwilling, to pay their rent due to Covid-19 and lockdown.  Remit Consulting’s research into the rent and service charge collection of large property management firms showed much lower collection rates than in previous years, and that over half-way through the previous quarter, around 25% of rent and 30% of service charge payments had not been made.

Why is this important? For the average person, whether a shopkeeper, manufacturer or office-based business pays their rent is of no interest. To them the consequence of a landlord not receiving his rent is irrelevant. For those tenants unable, or unwilling, to pay the previous quarter’s bills - the start of the next quarter will be hugely challenging and, for shopping centres and the high street, in particular, casualties have to be expected.

The impact of Covid-19 and the UK’s lockdown has placed strains on many landlord/tenant relationships and, in some cases, the communication between parties has broken down. The recently published government “Code of Practice for commercial property relationships during the COVID-19 pandemic” might help to move the relationships along. It suggests that: “In considering a tenant’s request to renegotiate their rent,” landlords may wish to bear in mind a number of factors, which include “The tenant’s previous track record under its lease terms.”

The impact of what happens on June Quarter Day could have widespread ramifications for the wider economy. It is not just about a few retailers facing bankruptcy (we’ve become used to that news), nor is it just about landlords taking a hit on their income.  What it is also about is the loss of income by pension funds and life assurance businesses and their cash flows when it comes to paying policy holders. It is also about the funding of property developments in the future and the provision of homes and workplaces and the redevelopment of our town centres.

In private, many asset managers and institutional investors are terrified about what might come to pass on June Quarter Day and fear that it could be worse than March Quarter Day, when, on average, less than half of rents due were collected across the residential and commercial sectors.

With a view to getting ahead of the curve, we are aware of asset managers in the commercial sector who, are undertaking detailed analysis to identify businesses which are most likely to be unable to pay their rent as part of their risk assessments. Others in the commercial property market are considering their positions regarding rent deposits and guarantees.

It is fair to say that some asset managers are fearing a large number of insolvencies across their portfolios and any subsequent redundancies could have a direct impact on the residential markets where a tenant’s ability to pay rent is often reliant on them being employed.  The timing of the end of the government’s furlough scheme will be crucial if the economy is to avoid a significant rise in unemployment, which many in the market fear is inevitable.

Immediately following June quarter day, Remit Consulting will be receiving and collating data from property managers, landlords and others in the commercial and residential property markets. The findings will be available soon after.

To receive a copy, or to participate in the study, please contact us now.

NEWS RELEASE:

UPDATED RESEARCH REVEALS COLLECTION OF RENT AND SERVICE CHARGE IN THE UK HAS STALLED

• Minimal increase in collection rates of March quarter day rent and service charge

• 25% of rent and 31% of service charge payments remain unpaid after 49-days

• Fears that this could be “as good as it gets”

• Attention turns to June quarter day “perfect storm”

The collection of rent and service charge payments that remain unpaid to landlords since the March quarter day has stalled according to ongoing research by Remit Consulting.

Since the beginning of April, Remit Consulting has surveyed six of the UK’s largest property management firms, responsible for nearly 78,700 separate leases on over 18,350 commercial and residential properties across the UK, regarding the collection rates of rents and service charges payable by commercial and residential tenants.

Overall, seven weeks after they were due, just 75% of rent and 69% of service charge payments have been received from commercial and residential tenants in the UK (an increase of 1% for rent and 3% for service charge over the previous seven days).

The retail sector has been particularly hard hit, with only 59% of rent and 58% of service charge payments having been received.  In the residential market, 86% of rent and 67% of service charges have been received by the property managers involved in the report.

“With only a minimal increase in the collection of outstanding rent and service charges over recent weeks, the majority of landlords and property managers have low-expectations that the situation will change between now the next quarter and fear that this could be about as good as it gets. All eyes are now turning to June,” said Steph Yates, a senior consultant at Remit Consulting. 

“For many, the June quarter day will represent the perfect storm.  Having weathered the ride so far, not only will tenants be receiving their rent and service charge demands for the next three months, but the quarter day coincides with the end of the government’s 90-day moratorium on landlords taking action against tenants for non-payment of rent.

“For those tenants unable, or unwilling, to pay the previous quarter’s bills - the start of the next quarter will be hugely challenging and, for shopping centres and the high street in particular, casualties have to be expected.”

Remit Consulting has been surveying major property management companies regarding the collection of rent and service charges since 2010. 

The latest data from Remit Consulting is illustrated below:

NEWS RELEASE:

Collection of overdue rent during coronavirus lockdown plateaus, according to latest research from Remit Consulting

• More than a quarter of all rent and a third of service charge payments are six weeks overdue

• No increase in rent collections recorded 42-days after March quarter day due date

• Plateauing of payments provides investors with an indication of likely income for the quarter

• Government’s announcements appear to have influenced payments

• Concerns about June quarter day growing among investors and property

The collection of outstanding rent due from residential and commercial tenants appears to have plateaued at an overall average of 74%, according to ongoing research by Remit Consulting.

The latest data analysed by the management consultancy, which has been collecting data regarding the collection of rates and service charges by some of the UK’s largest property management businesses since the March quarter day, reveals that there was no increase in the overall average collection rate of rent over the six weeks since the quarter day due date. The overall collection rate of service charge payments, over the same period, saw a 3% increase to 66%.

“The fact that the rates at which outstanding rent and service charge payments are being received has levelled off gives a degree of certainty to investors regarding the income they can expect this quarter,” said Steph Yates, a senior consultant at Remit Consulting.

“March quarter day, which occurred a few days after the Covid-19 lockdown came into force, saw just 48% of commercial and residential rent being collected by the members of the Property Managers Forum participating in our study. Following an initial period of what appears to be caution and uncertainty among tenants, the overall average collection rate of rent and service charges across the residential and commercial sectors rose steadily over three weeks as tenants seemingly adjusted to the reality of the situation.

“Collection rates then slowed around the time that the government announced protection measures for tenants affected by the coronavirus from aggressive landlords.  Since the week of the government’s announcement, made on the 23rd April, the collection of rent and service charge by property managers has increased by just 7%.

“While the figures show that 26% of rent and 34% of service charge payments remain outstanding overall, the picture in the retail sector is particularly grim.  Around halfway through the Quarter, and six weeks after payment was due, 42% of retail rents and 44% of service charges within the retail sector have still not been received,” said Yates

“Despite the hard work of the industry to collect the money due, the overall shortfall in income is a real concern.  There is a general feeling that this is going to be as good as it gets in this payment period and the attention of investors and their property managers is now being turned towards strategies for the June quarter day,” she added.

Remit Consulting has been surveying members of its Property Managers Forum since the beginning of April and has collected data from some of the UK’s largest property management firms concerning nearly 78,700 separate leases on over 18,350 commercial and residential properties nationwide. 

The latest data is illustrated below:

Covid-19 Crisis: Minimal Rise in Collection Rates of Quarterly Rent and Service Charge Payments

NEWS RELEASE:

Remit Consulting’s ongoing survey of major Property Management firms reveals:

• An overall average of 30% of rents and 39% of service charge payments due on March Quarter Day remain outstanding after 28 days

• Property managers report that “some tenants can’t pay, others won’t pay”

Remit Consulting’s weekly report into the collection rates of rents by major property management firms reveals that, on average, 30% of rents and 39% of service charges that were due for payment on March quarter day remain outstanding after 28 days. Concerns are growing among property investors and institutions regarding the willingness and ability of some residential and commercial property occupiers to pay due to the ongoing lockdown in the UK.

“The difference between the level of rent and service charge collection at the start of the quarter and 28 days later highlights how hard everyone has been working to secure payments. The overall average for rent collection has risen from 48% on the due date to 70% after 28-days. However, in the last week we have seen only a minimal uplift in the collection rates and there are fears that the ability, or willingness, of some tenants to pay what they owe has levelled off,” said Steph Yates, senior consultant at Remit Consulting.

“The emergency Coronavirus Bill, announced by the UK government just before the Quarter Day, contained provisions that protected commercial tenants from eviction if they were unable to pay their rent because of coronavirus.  This was then followed by a temporary ban on the use of statutory demands and winding up petitions until the end of June.

“While many tenants, who are struggling financially, are reportedly agreeing payment plans and deferring payments with their landlords, there are concerns from property and asset managers that other tenants appear to be burying their heads in the sand or deliberately avoiding paying their bills.

“A situation seems to be evolving where there are some tenants who genuinely can’t pay while others are simply choosing not to pay.  The property managers involved in the survey, and the institutional investors they represent, are expressing their concerns to us on a daily basis regarding the situation and fear that some tenants see the legislation as an excuse to simply to withhold payment of their rent. Their focus is already beginning to shift to the June quarter day as this will coincide almost exactly with the end of the government’s 90-day moratorium,” she added.

Remit Consulting has been surveying members of its Property Managers Forum since the beginning of the quarter, analysing the collection of rent and service charge concerning nearly 78,700 separate leases on over 18,350 commercial and residential properties nationwide.

The figures for all sectors are shown below.

While the Remit Consulting report seem to indicate a levelling off of collection rates, this may alter over the next week as many tenants with monthly terms will be due to make payments at the end of April/beginning of May.

“It might be that payments have plateaued for this quarter,” said Yates, adding: “Next week’s figures will shed more light on the situation.”

To view an infographic covering a summary of our research to date, click here.

Covid-19 Crisis - Collection rates of rent and service charge remain low for UK commercial and residential property

NEWS RELEASE:

Remit Consulting’s ongoing survey of major Property Management firms reveals:

• Managing agents report only a marginal increase in collection rates after 21 days of the Quarter

• More commercial tenants reported to be agreeing monthly payment plans

• June Quarter Day expected to be a major challenge as Covid-19 impacts UK property markets

Ongoing research by Remit Consulting into the collection of rent and service charge by the UK’s major property managers during the second quarter of the year has confirmed only a marginal increase in the amounts collected within 21 days.

The management consultancy has been surveying members of its Property Managers Forum since the beginning of April and has collected data from six of the UK’s largest property management firms concerning nearly 78,700 separate leases on over 18,350 commercial and residential properties across the UK.  The study initially revealed that only 48% of rents were collected on the Quarter Day due date, rising to 57% after seven days. The updated research shows that by the end of the 21-day period this figure had risen to 67%.

Senior Consultant at Remit Consulting, Steph Yates, said: “Despite the hard work by property managers, there was only a marginal uplift in the rent and service charges being paid by tenants after 21 days.

“While there is anecdotal evidence of an increase in the number of commercial occupiers moving to monthly payment plans, which indicates a change in behaviour, we are not seeing any major uplift in collection rates. This is concerning and property managers and landlords are already worrying about the June Quarter day, particularly as the quarterly payments were due only a few working days after the lockdown was put in place by the government.

“By June there will have been at least seven weeks where many business occupiers will have been economically inactive and cash-flow will have been severely impacted and reserves will have, undoubtedly, dwindled.

“Initial enquiries about rent holidays and concessions show that there is no clear picture yet. Tenant requests continue to come in, and each situation is largely being decided on a case-by-case basis. However, while there are far more requests that would have been seen in any previous year, it does not yet seem to be as widespread as was initially feared by some in the industry.”

The latest figures from Remit Consulting shed further light on the plight of the retail sector and reveal that, three weeks into the Quarter, just over half (54%) of the rent due from retail operators has been collected.

The picture in the residential sector is a little better, with property managers reporting that 68% of this quarter’s rent payments were collected within 21 days (up from 47% after seven days).

The REMark study also reveals that the payment of service charges due by tenants also remains very low as a result of the ongoing Covid-19 crisis, with an overall average, for both commercial and residential property, of 56% after 21 days (compared to 48% after seven-days). In the retail sector, the figure rose to 45% over the first 21 days of the Quarter.

“We are aware that some managing agents struggle with the different priorities when demanding income: while collecting service charges will help the agents to manage the buildings over the coming quarter; landlords are more interested in collecting the rent which may be required to fund the service charge shortfall in due course. Our figures show that, as with previous years, the effort and reward are focused more on rental income,” concludes Steph Yates.

REmark Report: The Impact of Covid-19 on the UK Property Market

NEWS RELEASE:

COLLECTION RATES OF RENT AND SERVICE CHARGE PLUMMET FOR UK COMMERCIAL AND RESIDENTIAL PROPERTY

Research by Remit Consulting into the collection of rents by leading property managers at the start of the second quarter of the year has revealed that the collection of rent, on the due date, from residential and commercial tenants, was down by as much as 50% compared to the same period in 2019.

The European real estate management consultancy has been able to compare current figures with those of its 2019 “REMark Report”, which included an analysis of rent and service charge collection rates for the same period last year.

Since the beginning of April the firm has surveyed six of the UK’s largest property management firms regarding the collection rates of rents and service charges payable by commercial and residential tenants. Between them, these firms are responsible for nearly 78,700 separate leases on over 18,350 commercial and residential properties across the UK.

The findings illustrate the extent to which the COVID-19 pandemic seems to be impacting the property markets. In 2019 the overall average figure for the collection of rents on the due date was 79%. In April 2020 this figure is 48%.

Overall service charge collection rates (due date) are even lower, falling from 73% in 2019 to 35% in 2020.

Rent and Service Charge Collection rates:

“While property managers are working hard to mitigate the impact of the pandemic, and further research is needed in coming days to get a clear picture on how agreed rent and service charge ‘holidays’ are impacting collection rates, these figures are likely to make uncomfortable reading for landlords, asset managers and investors,” said Steph Yates, a senior consultant at Remit Consulting.

“In the forthcoming weeks, we will continue to consult with the members of our Property Management Forum regarding the state of the markets. The data we collect will help the forum’s members to identify the possible consequences for the institutions and property investors they represent.”

Remit Consulting is planning to expand the survey over the coming weeks, to include one of the major Landlord associations (which is currently consulting its members regarding their participation).

If you would like to contribute to this research or receive further updates, please email Steph Yates.

Click here to view the Property Week article, and here to view the Financial Times article that relates to this release!

Our Christmas 2019 Newsletter…

12 days of Remit - one for each of our discoveries this year

Dear friends and clients,

We would like to wish you a very happy Christmas and prosperous New Year. As we've done in previous years, we are donating the cost of sending Christmas cards to the Guide Dogs for the Blind Association.

However, we hope this festive edition of our newsletter will fill you with Christmas cheer, as we look back at 2019. We’ve done a whip around the office to gather together some interesting discoveries from the year, across a range of topics, and we hope you will enjoy our twelve days of Remit…!
 

1.  You may remember our first frontispiece of 2019, back in January, 'Real Estate - a technology battleground?' As the year draws to a close, we’re still seeing an increasing amount of tech moving into the marketplace from non-property industries. Asset Managers need more “out-of-the-box” thinkers and a growing number of tech companies view property as just another approachable market. 
 

2.  The last year of the decade has also seen new and emerging FM and PM models starting to be accepted and used by the market for procurement.

3.  Our data paper with the RICS revealed in April that ‘100% of valuers believe that valuation data is the most difficult to get hold of’. This could either challenge the confidence of today’s valuations or protect valuers’ position as experts in analysing the data that is available.

4.  Looking back at our spring frontispiece, ‘Are "Prop-striches" taking their heads out of the data sand?’, and with the new insight from Andrew’s trip to RealComm in Nashville, we remain of the opinion that UK property companies are behind the US. The industry can catch up, but individual organisations will need to commit to sharing more of their data to enable better market transparency and efficiency.
 

5.  The student housing market has piqued our interest in 2019, as there’s no set fee structure for its management. Having always been an alternative market, student housing seems to be forging its own path, untethered by traditional thinking.

6.  Our ReTour in July confirmed what we predicted in 2017 and highlighted that having good cycle parking provision in a building not only adds to the wellbeing of staff but can be a differentiator in a competitive property and recruitment market.

7.  Excitingly the market does seem to have recognised and be reacting to this, as we detailed in our summer frontispiece, ‘Property cycle highlights industry challenges’.  2019 has seen a clear rise in investors and developers prioritising cycling facilities in their buildings. Sustainability, mental health, staff wellbeing and talent retention all play a key role in this decision-making.

8.  One of the hot topics from our October REMark Survey, was rent collection by Direct Debit – only 15% of all rent due is collected by Direct Debit or standing order.

9.  Unissu reported that total global PropTech funding surpassed $934m in October 2019 alone. This brings the total for 2019 (as of October) to just under $13 billion, across 454 individual funding events.

10.  Our November frontispiece, entitled ‘Leading edge, or bleeding edge? ’ explored 5G and its use in the present day. Although 5G is still in the early stages of deployment and many will not yet feel its effects (especially as many devices are not yet enabled), property companies are beginning to take it into consideration in their futureproofing strategies.
 

11.  Predictions from PlaceTech in November suggested that by 2025, there will have been an exponential rise in the volume and importance of data - a fifth of data gathered will be ‘hypercritical’ and a further tenth as ‘critical’. This sheer volume of essential data starts to negate the economic benefits we currently gain from using the cloud, and thus new storage solutions will come to the fore.
 

12.  Lastly, despite all of these 2019 tech developments, McKinsey have told us that by 2030, more than 66% of purchases will still occur in physical stores, and in-store experience will have a bearing on even more transactions. This offers great scope for PropTech to help to shape a better physical future, and for retailers to capitalise on more personalisation in store, where currently only 10% of retailers are differentiating themselves by doing so.

Click here to sign up to our quarterly newsletters!

REMark 2019: "Property managers have just five years to adapt if they are to remain relevant"

Investors, fed up with the status quo, are willing to take risks on new business models.

The current model of property management is no longer fit for purpose and traditional property managers have five years to adapt if they are to remain relevant, according to the latest REMark report from Remit Consulting, the biennial study that benchmarks the performance of the property management sector in the UK.

Andrew Waller of Remit Consulting said, "Two years ago the REMark report highlighted the need for property managers to adapt their models to meet the expectations of their clients regarding the deluge of data being generated from buildings, tenants, and customers. We also suggested that, because they are the only party that has a complete overview, property managers should look to take control and administer all property data.

“Two years down the line a number of progressive businesses are addressing the issue, but they are the exception rather than the rule. Many property managers are still showing no sign of wanting to evolve and, with much of their role being automated, we estimate that property management businesses need to adapt quickly if they are still to be relevant by the middle of the next decade.

“The latest REMark report confirms that the frustration of landlords, and the continuing animosity between them and service providers, has not lessened. The report reveals that investors are increasingly frustrated by inefficient and out of date property management models.

“The availability of affordable technology solutions has given property owners the ability to structure the services that they need in a different way. This is exposing gaps in the traditional business models of most property management companies. As one commentator said earlier in the year, ‘The property manager simply gets in the way of digitising the company’.

“This might not be fair, but it reflects the mood of many investors who are increasingly looking at taking asset, property and facilities management in-house so that they can control all aspects of the customer experience,” he added.

According to the REMark report, the volume of data regarding occupiers has exposed failings of existing models, which are being addressed by new business models and entrants into the property management market. The report highlights that this summer, following its declaration that the traditional property management model was broken, Legal & General Investment Management announced a new property and facilities management structure. At the same time, several other Fund Management firms, struggling to define new ways of working within the confines of an asset management structure, which has not changed in generations, have started programmes to review the way they deal with property management in its broadest sense and kick started conversations amongst UK managing agents on where the sector is going.

The REMark report identifies various new models, some of which have developed outside the property industry while others have evolved through a need to change but where the property owner lacked funds to invest.

Rent Collection

Elsewhere in the REMark report, Remit looked again at how efficient the property management sector is at collecting rents on time, comparing performance against previous reports.

Compared to the last report in 2017, it seems as though there has been no further improvement and the industry still struggles to collect 80% of rents on the due date.  The report considers why this is the case.

“One of our survey questions was regarding the use of direct debit as a method of rent collection,” said Steph Yates of Remit Consulting,

“It transpired that just 16% of residential rent is collected by direct debit and nearly 60% of the survey’s participants said that none of their residential rent was collected by this method.

“While direct debits hold clear advantages for landlords, at the moment there is no real incentive for tenants to sign up to pay rent by direct debit. There might be lessons to be learnt from the utility sector, which often offers money off bills in return for setting up and continuing direct debit payments.  When it is considered that 56% of customers pay their energy bill by direct debit we have to ask whether the property sector could offer something similar in return for reduced costs?

Rent & Service Charge Performance

When it comes to the collection of Service Charges the REMark report highlights that while collection levels on the due date have increased since 2017, the overall collection has decreased with only 95% of service charges being collected within 120 days (compared to 99% in 2015). This can cause problems for landlords when it comes to funding the shortfall particularly in increasingly uncertain market conditions that may result in more disputes, a reduced ability of tenants to pay and longer collection periods.

“Since REMark 2017, the big change in service charges is that the RICS Code of Practice is now a Professional Statement, marking the change from guidance to mandatory obligations for all members,” said Steph Yates.

“However, the reconciliation period is not mandatory and the REMark report reveals that 23% of respondents said that it takes them over four months, with reconciliation periods of over of 30 weeks not unheard of.”

“This could be a result of a number of things, including the trend for tenants to question and fight service charges - which has come back with a vengeance, particularly among large retailers - meaning an increased number of weeks as more scrutiny is taken over the accounts before issue,” she added.

Customer service

Inspired by the likes of WeWork and new technology, even traditional landlords are realising the value that can be added to their portfolios by treating tenants as ‘customers’ and by providing them with premium services. They are increasingly looking beyond the basic customer service and are setting off in competitive pursuit of the elusive ‘customer experience’.

The result has been an increased focus upon ‘front of house’ activities: building managers, receptionists, security personnel, etc, and it is clear that standards have risen dramatically in recent years. Progressive property managers have improved training and often recruit from the hospitality and hotel sectors.

This year’s REMark report reveals that 62% of the respondents now employ a dedicated ‘customer service manager’.

This is an important step forward,” said Charles Woollam of Remit Consulting.

“However, it is curious that only three-quarters of them are in full-time roles. This may imply that some landlords believe that creating customer experiences, and promoting best practice customer service, is only a part-time role,” he adds.

To find out more or participate in REMark, please contact Steph Yates.