Research from Remit Consulting predicts the shortfall in rent unpaid by business occupiers is expected to exceed £8.0 billion by the end of the moratorium on eviction of commercial tenants

The shortfall in rent that should have been paid by occupiers of commercial property in the UK during the pandemic is projected to reach over £8.0 billion by the end of March, according to the latest research from Remit Consulting. The March Quarter Day (25th), when payments of rent are due to be paid for the next three months, also marks the end of the Government’s moratorium on the eviction of business occupiers for non-payment of rent.

Remit Consulting’s ongoing study into the volume of rent and service charge payments paid by occupiers of commercial property, suggests that investors can expect a total shortfall over the three months of the December Quarter of around £5.4 million. This means that, by the start of the March Quarter, the total shortfall in rents since the start of the pandemic is likely to have reached over £8.0 billion.

Laura Andrews of Remit Consulting said, “Over the past two years, property investors, including many pension funds and other institutions, have experienced a shortfall in the rent payments they receive each quarter. Despite the gradual improvement in the figures over the whole of the pandemic, many business occupiers are still in arrears and a further shortfall, across all commercial property asset classes, of around 6-7% has to be expected by the end of the current quarter.”

While the end of the Government’s moratorium on eviction of business occupiers for non-payment of rent could provide greater clarity for landlords and property managers, resolving outstanding debts will not be straightforward and the financial legacy of the pandemic will continue to be an issue for the property sector for several years,” she added.

Remit Consulting has, since the start of the Covid-19 pandemic, 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.

Remit Consulting’s research reveals collection rates of rents from commercial property occupiers remain lower than in the previous quarter

• Verified figures of rent collected 35 days after December’s due date reveal an overall figure of 83.3%

• Highest 35-day rent payments of the pandemic for retail property

Landlords of commercial properties in the UK continue to see a shortfall in the amount of rent paid by their tenants, according to the latest research published by Remit Consulting. Despite the easing of Covid-19 restrictions, average rent collection rates reached 83.3% within 35-days following the December Quarter Day due date. While this is the second-highest 35-day percentage recorded by Remit Consulting since the start of the pandemic, it is far below the 99% that was recorded at this stage in the firm’s Remark Report from 2019.

The management consultancy’s research reveals that rent collection for offices, industrial and leisure properties are lower than for the same interval of the previous quarter. However, at 83.2%, the collection of rent from retail occupiers is the highest 35-day figure of the past 22 months.

Laura Andrews of Remit Consulting said: “The current trajectory of rent collection rates suggests that at the end of the current financial quarter, when the Government’s moratorium on the eviction of tenants in commercial property for the non-payment of rents comes to an end, there will be a further shortfall of rent collection of around 7-9%, adding to the total shortfall of £7.4 billion in rent that we estimate has been experienced by investors and property owners, which include many pension funds and other institutions.”

Remit Consulting has been analysing the collection of rent and service charge payments by the country's largest property management firms since March 2020, working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, and other members of the Property Industry Alliance (PIA). The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

Commercial Property Rent Collection

Rent collection by sector

Retail property rent collection comparison

Remit Consulting’s research reveals that rent collection for from tenants of UK commercial properties increased, despite the Omicron variant and the introduction of restrictions

• Verified figures reveal that, overall, 62.7% of rents were collected on December Quarter Day due date

• Rent collection for retail properties and from pubs, bars and restaurants improved compared to the previous quarter

• 93.0% of all commercial property rents were collected by the end of the September Quarter

The latest research published by Remit Consulting reveals that the amount of rent collected from tenants of commercial properties on the December Quarter Day remained at similar levels to those experienced by investors three months previously, despite the impact of increased restrictions introduced by the Government in response to the spread of the Omicron variant of Covid-19.

The management consultancy’s REMark Report reveals that, overall, 62.7% of commercial property rents were paid by tenants on the due date, rising to 71.8% within seven days. This compares to the collection of 57.4% on September Quarter Day, rising to 72.1% with seven days.

Remit Consulting also report that 93.0% of all commercial rent due was collected by investors and property managers by the end of the September Quarter. While this is the highest end of quarter figure so far in the pandemic, it represents a shortfall in the rent collected by investors, which include many pension funds and other institutions, of over £489 million for the three-month period. According to Remit Consulting, since the start of the pandemic, property owners have seen a total shortfall in the rent they have received from commercial occupiers of £7.4 billion.

Steph Yates of Remit Consulting said: "As the Omicron variant was first detected in the UK in late November, and it was not until mid-December that the government introduced restrictions such as the work from home guidance, the tougher guidance will have had a negligible effect on the previous quarter’s figures. However, there were concerns regarding the possible impact upon collection rates for the December Quarter Day, which seem to have been unfounded, with collection rates higher on due date that for any previous quarter during the pandemic so far.

“Rent collection rates for retail properties reached 62.3% on due date, rising to 70.1% within seven days. This compares to 59.8% and 68.8% three months earlier and there was a similar story for leisure properties, which include pubs, bars, and restaurants. This subsector saw 52.4% of rents collected on the December Quarter Day, increasing by nine percentage points, to 61.4% seven days later. In the previous quarter these figures were 34.3% and 57.2% respectively."

Melanie Leech, Chief Executive of the British Property Federation, said:“The data for Q4 suggests rent collection is stabilising as property owners and occupiers continue to reach agreements that will enable them to navigate the next phase of the pandemic, whilst also working together to resolve any outstanding arrears to avoid the need for arbitration or other legal process and ensure a smooth transition back to normal trading conditions.”

Remit Consulting has been analysing the collection of rent and service charge payments by the country's largest property management firms since March 2020, working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, and other members of the Property Industry Alliance (PIA). The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

Commercial Property Rent Collection  

Commercial Property rent collection comparison

Remit Consulting’s research predicts the shortfall in rent unpaid by business occupiers is projected to exceed £7.4 billion by the end of 2021

The shortfall in rent that should have been paid by occupiers of commercial property in the UK during the pandemic is projected to reach over £7.4 billion by the end of the current financial quarter, according to the latest research from Remit Consulting.

Despite improved levels of payments by tenants, many business occupiers are still in arrears with their rent and landlords, and projections for the current accounting period made by Remit Consulting as part of its ongoing study into the volume of rent and service charge payments since March 2020, suggests that investors can expect a total shortfall in rent for the September Quarter of around £435 million. This means that by the December Quarter Day (25.12.2021) the total shortfall in rents since the first Covid-19 lockdown is likely to have reached over £7.4 billion since the start of the pandemic.

Laura Andrews of Remit Consulting said, “Each quarter since March 2020 commercial property investors, which include many pension funds and other institutions, have seen a shortfall in the rent payments. While the figures have improved steadily during the pandemic, we are still expecting a shortfall at the end of the quarter, across all asset classes, of around 6% compared to pre-pandemic levels. This is bad news for investors, and for anybody whose pensions and savings are invested in real estate.

“While the emergence of the Omicron variant of Covid-19 may not have a great impact on the figures for the last three months, the increased restrictions, particularly in the retail and leisure sectors, may affect the amount of rent collected when the December Quarter invoices are issued by landlords and property managers.

“With the Government’s moratorium on eviction of business occupiers for non-payment of rent is due to end in March, and the introduction of the Commercial Rent (Coronavirus) Bill, the situation regarding outstanding payments should be clarified over the coming months. It will not, however, be a fast process, and we can expect that it will take years to resolve,” she added.

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.

Improvement in the collection of rent from commercial properties

• Overall rent collection stands at 85.2%, compared to 78.6% 35 days past the due date in the previous quarter

• Collection rates suggest landlords will experience a further shortfall this quarter

Over 85% of rent owed by businesses at the beginning of the September Quarter were paid within 35 days of the due date, the highest level seen so far in the pandemic, according to the latest research from Remit Consulting.

The average figure of 85.2% is 6.6 percentage points higher than at the 35-day point of the previous three-month period and, except for the June 2021 quarter, the collection rates are already higher than the 90-day collection rates in any quarter since the start of the pandemic.

“Despite the improving levels of payments by tenants, many business occupiers are still in arrears with their rent and the current trajectory of rent collection rates suggest that investors can expect a further shortfall at the end of the quarter, adding to the £6.97 billion that, since March 2020, has been unpaid,” said Steph Yates of Remit Consulting.

“With the moratorium on evictions of tenants due to end next March, two years after the first national lockdown, tenants who are unable to repay arrears are being urged to reach agreement with their landlords. However, should negotiations fail the government has, through new legislation, established legally binding arbitration and has pledged protect business occupiers from bankruptcy petitions and CCJs.

“This is a situation that will not be resolved overnight, and the recovery of rent arrears could be a challenge for years to come, which is bad news, not just for landlords but also for those whose pensions and savings are invested in real estate,” she added.

The latest figures from Remit Consulting show that, at 81.7%, the collection of rent from leisure occupiers rent collection 35 days after the due date was substantially higher than the same point of the previous quarter (59.1%) and that for the first time since the start of the pandemic the leisure sector performed better than the retail market (81.4%).

The office market was, once again, the best performing sector which saw 92.2% of rents collected.

Since the start of the pandemic, Remit Consulting has been working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, 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. The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

The shortfall of rent paid by commercial tenants during the pandemic “will exceed £7 billion” according to Remit Consulting

The UK Government has today (09 November 2021) announced that it is to introduce a new law that will provide a legally binding process to resolve the remaining commercial rent debts and to ‘protect tenants from rent debt claims against them’, aimed at helping the commercial property market return to normality.

At the end of the June Quarter of 2021, Remit Consulting calculated that the total shortfall in rents collected by landlords and managing agents over the pandemic had reached over £6.97 billion.

In the current financial quarter, 21 days after the September Quarter Day due date, the collection of commercial property rents in the UK reached an average of 81.9%, meaning that almost 20% of commercial property rents were still outstanding for the current payment period.

“While the introduction of the new law should bring clarity for both landlords and tenants, in the meantime there is still the question of the total shortfall of rent payments received by commercial property landlords and investors during the pandemic, which will now exceed £7 billion. There is no certainty that all of this money will ever be recovered under the new legislation,” said Steph Yates of Remit Consulting.

Since the start of the pandemic, Remit Consulting has been working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, 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. The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

Remit Consulting’s research has confirmed a significant improvement in the rate of collection compared to previous quarters during the pandemic.

UK Commercial property rent collection September Quarter Day + 21 days

Remit Consulting’s research shows that rent collection from tenants of UK commercial properties reach the highest levels so far in the pandemic

⦁ Verified figures reveal that, overall, 72.1% of rents were collected with seven days of due date

⦁ Significant uplift in rent collection for retail properties and from pubs, bars and restaurants

The collection of commercial property rents in the UK, seven days after the September quarter due date, have reached the highest level achieved for any quarter during the pandemic so far, according to the latest research from Remit Consulting in its regular REMark Report.

The figures for collection of rent and service charges, which are verified by the country's major property management agents, reveal that overall, an average of 72.1% of rents due from tenants of commercial property, were collected within seven days of the due date. This compares to a figure of 66.5%, collected at the same point in the previous quarter.

According to Remit Consulting, both the retail and leisure sectors showed significant improvements compared to previous quarters of the pandemic. Overall, 68.8% of retail rents were collected seven days after the September quarter day, compared to 62.3% at the same stage of the June quarter. Similarly, 57.2% of rents for leisure properties were collected, compared to just 40.1% in the June quarter.

The improvements were reflected by the sub-sectors, with 67.1% of high street retail rents having been collected and 46.8% of rents for pubs, bars and restaurants.

Steph Yates of Remit Consulting said: "The first seven days of the current quarter saw a rapid increase in the collection of rents and service charge payments, which is good news for investors and landlords such as pension funds and other institutions, particularly as the upward trajectory of payments from tenants is similar to the previous quarters of the pandemic. However, this quarter, the collection rates are on average, around six percentage points higher than the previous quarter, which was, in turn, the best three-month period of the pandemic so far.

"While the signs are promising, overall collection rates for both rents and service charge payments are still significantly lower than recorded by the REMark Report over the ten years prior to Covid-19."

According to the firm’s research, since the start of the pandemic in March 2020, investors and property owners, which include many pension funds and other institutions, have seen a shortfall in the rent they have received from commercial occupiers of almost £7 billion.

Remit Consulting has been analysing the collection of rent and service charge payments by the country's largest property management firms since March 2020, working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, and other members of the Property Industry Alliance (PIA). The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

Collection of rent on commercial properties improved during the June Quarter, but pandemic shortfall continues to grow

• Investors face a shortfall in rental income of over £707,000,000 from the previous quarter

• Total shortfall over the pandemic reaches over £6.97 billion

• September Quarter Day collection figures higher than compared to the previous reporting period

Investors in the UK's commercial property sector experienced a shortfall in rent collected of £707,265,000 in the three months of the June Quarter, according to the REMark Report, the latest research published by Remit Consulting.

Based on verified financial reports from national firms of property managers responsible for 125,000 leases on over 31,000 prime commercial property investment properties across the country, Remit Consulting has analysed rent and service charge payments for the three months between the June and September quarter days.

"The data shows that, over the 90 days of the June Quarter, 88.8% of the rent due to be paid by tenants of commercial properties to their landlords had been collected. By comparison, at the end of the March Quarter 2021, an average of 80.7% of all rents had been received from business tenants," said Steph Yates, a senior consultant at Remit Consulting.

"While this improvement is most welcome, the total shortfall in rental income since the beginning of the pandemic has reached almost £7 billion. There is great uncertainty regarding how much of this may ever be recovered, and the consequences for pensions, savings and investment.

"Despite the improved collection rates over the previous three months, the verified figures for collection rates at the start of the September Quarter suggest that we are not yet out of the woods, with an average of just 57.4% of the rent payable, across all sectors, having been collected on the due date. While this figure is better than witnessed in the previous quarters of the pandemic, it is still significantly lower than experienced prior to the first national lockdown in March 2020," she added.

While the collection of rent from retail and leisure operators were, once again, the lowest of all the sectors recorded by the REMark Report, the study also confirms a marked improvement compared to the previous quarter. The collection of retail rents was 9% higher on the September Quarter day compared to three months earlier while the payment of rent, on the due day, by leisure occupiers was 10% higher than on June Quarter Day.

The collection of rent from both the office and industrial sectors were also higher than seen in June.

Working in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, 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 Amazon Effect

Amazon – the company we love to love and love to hate - has received more than its share of brickbats over the years ranging from the environmental impact over its over-generous packaging to adverse comments about avoiding tax. It seems that Amazon is not the standard bearer we would hope for in ESG (Environmental, Social and Governance) matters.

But wait; there has been positive press recently since it announced plans to create 10,000 jobs in the UK this year, and will pay London based operations staff a minimum of £10.80 per hour (£1.89 more than the national living wage for over 23s). What’s more, across the pond, Amazon’s introduction of higher wages in 2018 forced the hand of competitors, such as Levis, to also offer higher wages to workers which changed the landscape of local economies, in what has been coined the ‘Amazon effect’.  This must be good news for, er, social impact on the community.

This ‘Amazon effect’ also shows the wide-reaching social impact that can be achieved through corporate policy and action.

ESG is multifaceted and pursuing and succeeding in all elements at the same time is all but impossible given the wide range of possible impacts a large company can have on its community. Where does one start with so many possible bear traps?

In real estate, there is not only a focus on reducing carbon emissions in the construction and operation of buildings, but also the social impact on local communities that is possible through innovation, technology and the informed use of data.

The increasing demand from investors for ESG performance data they can trust in order to make informed investments, coupled with the increasing regulations (such as SFDR), is promoting transparency around ESG throughout the industry. A cohesive ESG strategy focussing on increased transparency and prioritising ESG policies can not only add value and create additional returns for commercial real estate investors, but at the same time demonstrate the impact that individual companies are having on local communities.  

We can’t guarantee that a focus on ESG strategy will keep you out of the papers but hopefully the press coverage will be for the positive impact you are having on the communities affected by your portfolio.

IMPROVEMENT IN PAYMENT OF COMMERCIAL PROPERTY RENTS CONTINUES

22nd July 2021

73.9% of the rents due from commercial tenants received within 21 days of the June Quarter day

Good news from the High Street as 69.6% of retail property rents were paid within 21 days of the due date

The collection of rent from commercial property tenants has, 21 days after the June quarter due date, continued to reach the highest level achieved at the same point of any financial quarter of the pandemic so far, according to the latest figures published by Remit Consulting.

The figures released from the firm’s REMark Report, which are verified by the country's major managing agents show that overall, an average of 73.9% of the rents due from commercial tenants were paid within 21 days of the due date. This compares to 67.3% collected at the same point in the previous quarter and 59.2% recorded 12 months previously.

The sector that experienced the largest increase in rent collection compared to the March Quarter 2021, was the retail sector, where rent collection reached 69.6% compared to 57.8% at the same point three months ago. By comparison, 21 days after the June quarter day in 2020, just 47.7% of retail rents had been collected.

The leisure sector has also seen a marked improvement in the current quarter, and after 21 days, 49.5% of rents have been collected. In the March quarter, the equivalent figure stood at 38.4%.

Steph Yates, a senior consultant at Remit Consulting, said: "This is clearly good news, and it would appear that we are on course for the highest total of quarterly payments recorded so far during the pandemic. The improvement seen by the retail and leisure sectors will be particularly welcomed by investors and is a reflection of the relaxation of many of the Covid-19 restrictions over recent weeks. Indeed the latest news reflects this sentiment, with some landlords announcing that demand for rent concessions has dropped and that they aren’t expecting to be granting any more concessions over the course of the next quarter.

“However, it is clear that a significant number of tenants are still unable, or unwilling to make the payments that they owe and while the Government’s moratorium on evictions of business tenants for non-payment of rent continues, we expect that the shortfall in income experienced by investors will increase further.”

Remit Consulting calculates that, since the start of the pandemic in March 2020, investors and property owners, including many pension funds and other institutions, have experienced a shortfall in the rent they have received from commercial occupiers of £6.4 billion, equating to approximately £1 in every £6 of rent due going unpaid.

The latest REMark Report also reveals that the payment of Service Charges by tenants increased marginally and, overall, 66.8% was paid by businesses within 21 days of the due date. This compares to 64.7% received 21 days after the March Quarter day.

During the pandemic, Remit Consulting has worked in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, 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. The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

Remit Consulting reveals a shortfall of £6.4 billion in rent income for investors since start of the pandemic, as just half of commercial property rents were collected on June Quarter Day

Non-payment by a hard-core of tenants reflects the pattern of the previous three Quarters

20% shortfall in rents due from business tenants over previous three months

There was another 20% shortfall in the payment of rents by business tenants during the March Quarter 2021, and just half of all rents due on the June Quarter Day were paid to owners of commercial property in the UK, according to the latest figures published by Remit Consulting.

The management consultant’s REMark Report shows that the overall average for rent collected on the June 24th due date stood at 49.1% and that, at the end of the March Quarter 2021, an average of 80.7% of all rents had been received from business tenants.

Steph Yates of Remit Consulting said, “The reconciled figures for the June Quarter Day show that, across all sectors, just shy of half of rents were paid on time. This figure is broadly in line with the amount collected at the start of the previous three Quarters, and compares favourably with the figure from 12 months ago when just 37.8% of rents were collected.

“Once again, over the previous financial quarter, there was another substantial shortfall in what was due to be paid by tenants, meaning that pension funds, institutions and other investors will have taken another hit in their incomes.”

“What we are seeing are very similar collection figures to previous Quarter Days, and this seems to be the pattern that the property managers and their clients will have to deal with for the foreseeable future. While it is too early to predict, if this Quarter follows the trajectory of the last 15 months, investors can expect further significant shortfalls by the autumn.”

According to Remit Consulting, since the start of the pandemic in March 2020, investors and property owners, which include many pension funds and other institutions have seen a shortfall in the rent they have received from commercial occupiers of £6.4 billion, equating to approximately £1 in every £6 of rent due going unpaid.

Remit’s figures for the June Quarter Day, which are verified by the managing agents, show that more than half (50.8%) of rents were collected on time from the retail sector and that 61.7% of office rents and 60.1% of industrial rents were collected. Just 24.1% of rents were collected from the leisure sector on the due date.

“While the government’s recent announcement that the moratorium on evictions is being extended until next March has not made things worse, it has not got any better and there still appears to be a hard-core of tenants choosing not to pay their bills. Landlords are continuing to accrue mounting losses,” said Steph Yates

“As one property manager put it, ‘the government have kicked the can further down the road than a Jordan Pickford goal kick!’” she added.

The data on the collection of service charges were broadly similar and, with an overall average of 43.0%, are very similar to the figure for the March Quarter (44.5%).

During the pandemic, Remit Consulting has worked in conjunction with the British Property Federation (BPF), the RICS, Revo, the Property Advisors Forum, 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. The research covers around 125,000 leases on 31,500 prime commercial property investment properties across the country.

Rent collection rates

Due date rent collection comparisons - Mar-20 to Jun-21

Service Charge collection rates

Remit Consulting's research shows hopeful signs on the High Street.

Collection of High Street Retail rents approach 70% after 35-days of the March Quarter

There is finally a sign of good news from the beleaguered High Street, according to the latest research from Remit Consulting regarding the collection of rent from commercial property occupiers.

Remit Consulting’s REMark Report into the amount of rent and service charges collected 35 days after they were due on the March Quarter Day reveals that 67.7% of rents due from high street shops had been received by landlords and property managers. This figure is 21.8% higher than in the previous quarter and 18.7% higher than in the September quarter last year. The figure is the highest seen at this stage of a quarter during the pandemic.

The overall figure for all sectors showed that 71.8% of rents were collected 35 days after the due date. This is almost identical to the figure for both the December and September quarters.

While there has been an improvement for high street retail, the collection rates of rent for leisure properties (hotels, pubs, bars and restaurants) was around 15% lower than in December. The collection rates for the hotel sector were particularly poor, with only 31.2% of rents collected 35 days after the due date. This compares to a figure of 45.9% for the December quarter day +35 day figure.

Steph Yates of Remit Consulting said, "The figures for High Street retail have been higher than in previous quarters, but the latest figures suggest that this is a sustained improvement with over 21% more rent being collected in the current quarter compared to three months ago, which is good news. This probably reflects that the majority of retailers have now reopened. However, the leisure sector, which cannot fully reopen yet, continues to struggle.”

“Whilst the situation on the High Street seems to be improving, we should not forget that it comes from a very low base and that, 35 days after rents were due to be paid, just 63.3% of all retail rents have been collected,” she added.

Since March 2020, investors and property owners, which include many pension funds and other institutions, have seen a shortfall in the rent they have received from commercial occupiers of over £5 billion which, according to Remit Consulting, equates to £1 in every £6 of rent due going unpaid. The firm’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.

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.

Rent collection by Quarter

High Street Retail rent collection (December 2020 and March 2021)

Rent collection rates

Service Charge collection rates

Remit Consulting’s research raises concerns of a further significant loss to commercial property landlords 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% of the rent and 64.7% 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,” said 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% 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 £5 billion which, according to Remit Consulting, equates to £1 in every £6 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,” said 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% higher than at the equivalent period of the December Quarter.

Laura Andrews added: “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% 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.

Rent collection by Quarter

Rent collection rates

Service Charge collection rates

REMark Report shows that payment of rent and service charges for commercial property recovers some lost ground

The collection rates of rent and service charge payments on commercial property improved over the first seven days following the March Quarter due date, according to the latest research from Remit Consulting.

“Although the amount of rent and service charges collected on the due date was one of the lowest figures for a Quarter Day over the past year, we recorded a small recovery in the rate of payments over the first week of the Quarter and reached very similar levels to those experienced previously during the pandemic,” said Steph Yates, senior consultant at Remit Consulting.

“While, on the face of it, this is good news and the trajectory of collection rates appears to be in line with those experienced over the past year, we should not forget that this ‘new normal’ is still around 30% lower than in a typical, pre-Covid, Quarter and that investors and property owners have seen a shortfall of over £5 billion since the start of the lockdown restrictions in March 2020. This equates to £1 in every £6 of rent due going unpaid,” she added.

Laura Andrews of Remit Consulting added: “With the recent relaxation of some of the Government’s Covid-19 restrictions it is hoped that the collection rates may improve further, particularly for retail and leisure occupiers, and the next few weeks will provide a clearer picture as to the scale of any shortfall at the end of June when the Government’s moratorium on evictions for non-payment of rent is due to be lifted.

“The longer that the moratorium is kept in place, the greater the damage being inflicted on pension funds and other institutional investors will become clear and our research shows that there is still a hard-core of tenants who are either unable to pay or are choosing not to pay.”

Remit has also noticed an overall change in behaviour – the spread of rental payments over the quarter may suggest a long-term movement to monthly payments.

“Over the past twelve months, many tenants and landlords have agreed on concessions and revised payment plans. Such agreements have seen an increase in the number of business occupiers paying rent monthly, and it remains to be seen if this will become a common feature of leases on commercial property in the future,” Laura added.

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.

Rent collection rates

Service Charge collection rates

Financial institutions face further shortfalls in rental income from commercial property portfolios

• Rental income shortfall from business occupiers reached £5.34 billion over the first 12-months of the pandemic

• March Quarter Day collection figures worst since June 2020

Pension funds, insurers, institutions and other investors in the property sector experienced a shortfall of £5,343,435,000 in rent collected on commercial properties over the first twelve months of the pandemic, according to the latest research published by Remit Consulting.

Based on verified financial reports from national firms of property managers responsible for 125,000 leases on over 31,000 prime commercial property investment properties across the country, Remit Consulting analysed rent and service charge payments for the three months between Christmas and the March Quarter day.

“Over the 90 days of the December Quarter, the shortfall experienced by investors, many of which are pension funds, insurers and other institutions totalled over £1.1 billion with 78.6% of the rents due collected overall,” said Steph Yates, a senior consultant at Remit Consulting.

“While this figure is generally in line with the previous three quarters of the pandemic, there were some concerning trends within the different sectors that we study with the rent collected on leisure properties (restaurants, pubs, etc.) falling by nearly 6% compared to the previous quarter. The same comparison for retail properties saw a fall of nearly 3%.

"The initial analysis of the data on rent collection for the March Quarter Day indicates that property managers are seeing further falls in the levels of rent paid across the board. Overall, less than half of the rent payments due on March Quarter Day were received by property managers and reveal the poorest start to a financial quarter since June last year, which were the lowest collection rates of the pandemic so far," said Laura Andrews of Remit Consulting.

"After 12 months of lockdowns and restrictions, it is possible that the ongoing uncertainty regarding the route out of the pandemic, combined with a further extension of the Government's moratorium on evicting tenants due to non-payment of rent because of Covid-19, is causing further issues with rent payments from business occupiers,” she added.

Steph Yates confirmed the concerns of property managers and many institutional asset managers regarding the uncertainty surrounding many tenants’ ability to pay their debts.

“The extension of the moratorium at the beginning of March will have pleased the hard-core of business occupiers that are choosing not to pay rent. It may also have caused other tenants to withhold their rent. While they remain in occupation without paying rent, landlords are faced with stranded assets, not knowing if the tenant is viable or not. Paraphrasing the Nobel Prize-winning physicist, we are describing them as ‘Schrödinger’s tenants’ - occupiers that are simultaneously both alive and dead,” she said.

Remit Consulting also reports the growing expectation within the property sector that, when the moratorium is lifted, the market might see an increase in the use of Company Voluntary Arrangements (CVAs) as an escape route for businesses struggling to pay their rent.

Government statistics, provided by The Insolvency Service, show that during 2020 insolvencies in the UK, including CVAs, was at their lowest since 2010. Additionally, the number of CVAs in February was just a third of those witnessed twelve months earlier.

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 moratorium, shortfalls in rent collection and the rise of Schrödinger's tenant.

While it was expected that the Chancellor of the Exchequer would use his budget speech to announce an extension to the government's moratorium on the eviction of commercial tenants due to the pandemic, the news of another extension actually came a week later in a statement from the Housing and Business secretaries.

Property owners and investors will now have a further three months during which their inability to pursue non-paying tenants in the courts will not only inflict further financial pain for those reliant on the income from commercial property investments but will also increase the levels of outstanding debts accrued by tenants unwilling or unable to pay.

“Extending the moratorium again simply delays the inevitable while increasing the burden on pension funds, insurance companies and other institutional investors,” said Steph Yates of Remit Consulting.

“Our research shows that there is a hard-core of business occupiers that are choosing not to pay rent. They remain in occupancy but are not paying rent. To paraphrase Schrödinger, these tenants are simultaneously both alive and dead.

“The question among the property managers and asset managers that we have spoken to is how the mounting debts being accrued by tenants are to be dealt with. There is an expectation within the real estate market that, with mounting debts among tenants, CVAs will be an attractive solution to many occupiers who have been able to avoid paying rent without fear of eviction.”

Government statistics, provided by The Insolvency Service show that during 2020, the number of insolvencies, including CVAs, in the UK was at its lowest since 2010.

“It is possible that the non-payment of rent has allowed some companies to avoid collapse during the pandemic, and it’s hard not to see the Government’s moratorium as a multi-billion pound injection of cash by landlords and investors into businesses that are effectively insolvent,” added Steph Yates.

According to research by Remit Consulting, since the start of the pandemic and the announcement of the moratorium, owners of commercial property investments have, overall, seen a shortfall in their income of around 20-25% each quarter. The firm’s ongoing research regarding the collection of rent points to a similar shortfall at the end of the current quarter, which will mark 12 months since the start of the U.K.'s first national lockdown.

The data reveals that over the nine months of the pandemic, commercial property landlords in the UK experienced a total shortfall in their incomes of around £4.2 billion. It is estimated that by the end of March this figure will be around £5.5 billion.

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 in March 2020, 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) in a study of around 125,000 leases on over 31,000 prime commercial property investment properties across the country.

NB. This article was edited following the announcement by the Government on the 10th March 2021.

Retail property rent collection levels fall compared to previous quarter

• Rent payments on retail property down around 5% compared to the same stage of the previous quarter

• Office and industrial markets performing closer to pre-pandemic levels

Remit Consulting’s latest research into the collection of rent and service charges from tenants in commercial properties reveals that while the rate of collection of rents in the current quarter is broadly similar to those seen in the previous quarter, in certain sectors, rent payment rates fell in comparison.

The research shows that 35-days after the December Quarter Day due date, payments by retailers were down around 5% compared to the same stage of the previous three-month period.

“In the office and industrial markets, we recorded rent collection rates of 89.8% and 86.8% respectively,” said Steph Yates of Remit Consulting.

“Drilling deeper into that data reveals that the rent collection from occupiers on business parks and out-of-town locations, along with those from specialist distribution and logistics occupiers, were even higher and, 35-days into the quarter, reached around 94%. These figures are not far off what we witnessed in the pre-pandemic REMark study of 2019.

“However, the situation in the retail market has deteriorated over the last three months and, after 35 days of the current quarter, only 45.9% of rents had been collected from high street retailers and just 31.6% of rents had been collected from pubs, bars and restaurants,” she added.

The research reveals that, overall, the figures for rent and service charge collection are following a similar pattern to that witnessed in the previous quarters of the pandemic, and suggest that, by the end of March, there will be a further shortfall in the income of landlords of around 20%.

Laura Andrews of Remit Consulting commented: “If the rate of collection of rents from commercial occupiers continues on its current trajectory, we can expect a total shortfall over the first twelve months of the pandemic of around £5.5 - 6.0 billion.

“The next Quarter Day will coincide with the anniversary of the first lockdown of the pandemic, along with the end of the Goevernment’s moratorium of the eviction of commercial tenants for non-payment of rents due to Covid-19.

“With many businesses, particularly those in the retail and hospitality sectors, still struggling to pay their rent, the future is looking particularly bad for the High Street. With the end of the Government’s moratorium on the eviction of commercial tenants looming at the end of the quarter, March could prove to be a perfect storm for tenants of commercial property,” she added.

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 in March 2020, 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) in a study of around 125,000 leases on over 31,000 prime commercial property investment properties across the country.

Remit Consulting's rent collection research paints gloomy picture for the High Street.

• Rent and service charge payments on commercial property remain low

• Hard-core of tenants still unable or unwilling to pay

With the end of the Government’s moratorium on the eviction of commercial tenants looming at the end of March and with many businesses, particularly those in the retail and hospitality sectors, still struggling to pay their rent, the future is looking bleak and particularly bad for the High Street, according to the latest research from Remit Consulting.

The firm of management consultants has been analysing the collection of rent and service charge payments by the country's largest property management firms since the start of lockdown, 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) in a study of around 125,000 leases on over 31,000 prime commercial property investment properties across the country.

The latest figures published by Remit Consulting reveal the volume of rent and service charge payments made by business occupiers since they became due on December Quarter Day (Christmas Day). The research reveals that, overall, 67.2% of rents and 63.7% of service charge payments had been received within 21-days of the due date – broadly the same as in the previous quarters during the Covid-19 pandemic. The data shows that office and industrial sectors saw increases in rent collection rates compared to the same stage in the September quarter, while the retail and leisure sectors saw falls.

“The current quarter is closely mirroring the collection rates seen in the preceding quarters during the pandemic and while the collection rates are not worse than in the previous quarter, the forecast is not looking good and there are storm clouds on the horizon,” said Steph Yates, a senior consultant at Remit Consulting.

“If payment of rent and services charges continue to follow the pattern seen previously, the expectation will be for around 80% of rents and service charge payments to have been met by the end of March. This appears to be the new normal for the commercial property market and reflects not only the economic uncertainty caused by Covid-19 and the inability of some tenants to pay, combined with the reluctance to pay by others.”

Remit Consulting highlights that this makes the ending of the Government’s moratorium on evictions in March a big deal for the market, particularly in the retail and leisure sectors, where collection rates for both rent and service charges have been consistently lower during the pandemic. The report suggests that if collection rates follow the form book, owners of retail and leisure properties can, at the end of the quarter, expect to see a shortfall of around 25% for retail properties and maybe 40% on leisure properties.

The REMark report suggests that, following the end of the moratorium, there are four groups of potential behaviours for those who are currently not paying:

1. Those who have agreed payment plans with their landlords

2. Those who plan to pay going forward without paying any back-dated rent and service charge payments (“non-payment plans”)

3. Those who cannot pay and will cease trading

4. Those who choose to pursue a Company Voluntary Arrangements (CVA)

“With service charge payments being excluded from the Government moratorium on evictions, the data suggest that around 25% of retail occupiers are either unable or unwilling to pay their rent, with an even higher proportion of leisure property occupiers in the same situation. These tenants must be considered to be vulnerable to insolvency, bankruptcy and eviction,” said Steph Yates.

“While the prospect of so many business premises becoming vacant as a result of the pandemic is of concern to everyone involved directly with the property sector, from property managers and asset managers to the pension funds, insurance companies and other institutional investors, it should also be worrying local authorities and town planners who could well see the impact of insolvencies in the coming weeks and months. Since last March the sustainability of businesses and the impact of the pandemic on the property market has, in the main, remained hidden, impacting only landlords, investors and property managers.

“At the end of this quarter, the effects on our towns and cities may become much more tangible,” she added.

Remit’s online ReTour event highlights the growth of cycling and active travel provision within the office market.

Remit Consulting hosted the first of four virtual “ReTour” events on the 14th January, with panellists from Make Architects, CO-RE, the London Cycling Campaign, 22 Bishopsgate and SpokeSafe.

Before the pandemic, the ReTour events featured a peloton of property professionals cycling around central London to visit some of the most innovative examples of cycling and active travel facilities in office buildings around the West End, Midtown, the Square Mile and the City Fringe.

The first of the Covid-19 versions of ReTour proved to be far more relaxed with over 350 people attending the webinar from the comfort of their own Internet connection!

Annie Panteli, operations manager at 22 Bishopsgate in the City of London was the event’s first speaker who described how the 62-storey building’s ‘Bike Park’ has quickly evolved into the ‘Active Commuter Park’ (ACP) and a place that can support all active travellers who work within the City landmark building.

The ACP provides 1,700 bike spaces of different designs (many with e-charging points), 1,300 lockers, 75 showers and a facility to hire bikes for short journeys around the city.

Highlighting the need for improvements to infrastructure all around London, Annie explained that, as part of the building’s initiative to provide “Active Commuting as a service”, a survey of occupiers was undertaken early on in the process. While this confirmed the demand for secure storage within the building (which can be accessed by the 22 Bishopsgate App) the biggest concern of occupiers was their safety on crowded streets and pavements during their journeys to and from the workplace.

Max Wilson of SpokeSafe picked up on the need for improved cycling facilities around the capital and described how his company is looking to help property owners to improve facilities for cyclists and monetise underutilised spaces in buildings by providing secure bike parking spaces that are accessible via a mobile app.

He also confirmed that during the pandemic SpokeSafe had noted a higher demand for storage facilities suitable for e-bike charging to the extent that the next facility to be opened in central London would have 25% of the spaces dedicated to e-bikes. Max attributed this to a widening of the demographics of cyclists with an increased number of older people choosing to cycle.

“We’ve also got of demand from the logistics market, like Uber Eats and Deliveroo,” he said, outlining their specific needs in terms of space and the high frequency of use with many visits to and from the storage facility during the day. He confirmed that future SpokeSafe facilities would have a clear delineation of users to separate the logistics users from commuters.

Max outlined his vision that with a growing network of SpokeSafe Hubs, outdoor lockers and third-party spaces managed by SpokeSafe the business could “provide cyclists, with nothing more than a phone and their own bike, access to an entire network of spaces.”

Access to bike storage, showers and lockers is also a key focus at 20 Ropemaker Street, the 450,000 sq ft, 27-storey development designed by Make Architects.

David Ainsworth of CO-RE, who is the development and project manager for the landmark office scheme, confirmed that the provision of high-quality cycling and active travel facilities was a key factor in the 2020 pre-let deal with law firm Linklaters of over 300,000 sq ft.

The property’s architect, Robert Lunn of Make Architects said that the building’s design featured a dedicated, principal entrance for cyclists and active commuters that would make it a “true entrance” and front door and highlighted that this was very important as, with potentially 800 bikes being stored in the building, it could be the main arrival and departure point for between 15 and 25% of all the occupiers.

He told the ReTour audience of the attention that had been taken in considering how to get so many cyclists, along with other active travellers, in and out of the building efficiently. This has been achieved through the use of a wide, shallow staircase with powered wheel ramp and lifts leading to a diverse range of cycle storage solutions, lockers and shower facilities.

The diversity of active travel methods and cycles was also picked up in the presentation by Stewart Dring of the London Cycling Campaign, which has seen great changes and advances during the pandemic. He highlighted the fact that more people are cycling around the capital, increasing the need for more cycling and better cycling infrastructure.

He praised the fact that “decades of progress had been made in a matter of months,” confirming that, before the pandemic, the Mayor of London has been looking to triple the amount of segregated cycle space over four years, five times as much had been put in place between the start of the pandemic and the end of the year.

Stewart also confirmed that London’s ‘Street Space’ programme would see further changes in the future with additional cycle lanes and wider paths, with more measures aimed at reducing access for cars to create low-traffic neighbourhoods.

Stewart suggested that an increase in cycling would improve many of the issues facing London, such as obesity and pollution, making the capital a more healthy and sustainable global city. Which can only be good for everyone.

The second ReTour event will look at the provision of cycling and active travel facilities within office properties across the UK and will be held on Thursday 25th February at 1700 and you can register by clicking here

REMIT CONSULTING CONFIRMS THAT COMMERCIAL PROPERTY INVESTORS SAW A £4.2 BILLION SHORTFALL IN RENT COLLECTION IN 2020

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

• Collection rates in December Quarter no better than at the start of the pandemic

Pension funds, insurance companies, REITS and other investors in commercial property experienced a shortfall in rental income of £4.2 billion last year, according to the latest research from Remit Consulting.

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.

The latest data published by the management consultants reveals that in December, at the end of the September Quarter, there was an overall shortfall in rent collection from tenants of commercial properties of 20.9%.

“When combined with similar shortfalls from the March and June quarters, we calculate that the collective loss to investors between the start of the pandemic and the end of the year totalled over £4.2 billion,” said Steph Yates, a senior consultant at Remit Consulting.

“On the basis that much of this unpaid income will be considered as ‘bad debts’, institutional investors who rely on rental income to help fund pensions, insurance payments and savings are dealing with significant losses and the shortfall has implications beyond the sector,” added Steph Yates.

The collection of rents that became due for payment by tenants on Christmas Day (December Quarter Day) have shown a similar pattern to those witnessed in the three previous quarters. However, the collection rates of service charge payments once again increased.

“The collection of service charge payments improved consistently during 2020,” said Steph Yates.

“With a greater emphasis and demand for property maintenance, cleanliness and security during the pandemic there is a realisation by many tenants that service charge payments are essential to keeping buildings functioning and usable. The fact that service charge payments are excluded from the Government’s moratorium of evictions might also have influenced the increased levels of payments,” she added.

“While last month's announcement that the moratorium on evictions will end in March provides some clarity to the situation, the impact of Covid-19 on the real estate market is not, as the government suggests, simply a question of landlords and tenants trying to ‘reach agreements on rent’.

“Our research suggests that around a quarter of all commercial property leases are subject to rent concessions and ‘holidays’ or have been renegotiated since the start of the pandemic. The fact that a week after they were due to be paid more than 40% of rent was still outstanding overall suggests that

there is still a hard-core of tenants unwilling, or unable, to pay what they owe who are still not communicating with their landlords,” she added.

Melanie Leech, Chief Executive, British Property Federation said: “It is a bleak start to 2021 for businesses already hard hit by the impact of Covid-19. Property owners remain committed to supporting these businesses but themselves face significant pressure as mass non-payment of rent continues.

“It’s more important than ever that businesses that can afford to pay, but have exploited the moratorium and avoided payment, now pay their debt. Those businesses that are truly struggling and have not already engaged will need to come forward, treat property owners as economic partners, be transparent about their finances and work collaboratively to create a sustainable path forwards. The Government should do everything it can to incentivise this including extending relief from the crippling cost of business rates in 2021.”