LPartiers and publicans may not be the only ones ruining the latest restrictions aimed at stemming the spread of the coronavirus. A return to work from home and orders to close pubs and restaurants before 10 p.m. won’t help fill the coffers of landlords who are expected to run out of £ 4.5bn in rent between mid-March and the end of this year. the year.
“The restrictions imposed this week represent a step backwards in the economic recovery and will negatively affect businesses in most sectors. While we believe the restrictions are fairly minor, we believe they will result in a reduction in the amount of rent we can collect, ”says Mark Jarrett, Head of Property Management at Colliers International.
While the government has yet to explain how landlords and commercial tenants should share the pain of lost income while reducing socialization and shopping, the two sides continue to fight, store by store.
On Tuesday, we’ll get a preview of the progress of the fight on September 29, the “day shift,” when store and restaurant owners traditionally collect one of four annual rents.
While many retailers and hospitality businesses have now shifted to monthly payments in order to manage cash flow, the quarterly interval is a key valuation time.
Two months after June Rent Day, landlords had collected nearly 70% of money owed, down from just over 18% by the due date, according to analysts at real estate software company Re-Leased. The figures relate to expected rents at the start of the quarter and therefore do not reflect the significant reductions agreed upon being negotiated by many retailers.
This month’s rental transport should follow this pattern. Stores may have reopened in June after a nearly three-month lockdown, but the slow return to Main Street has kept the economic pain going.
The pandemic appears to have accelerated the shift to online shopping and made many people think twice about spending on non-essentials as job losses and pay cuts loom. Cash-strapped retailers are using the temporary ban on evictions for non-payment of rent – now extended until the end of December – to save money.
Since March 16, just over half of commercial rents and just under 70% of leisure rents have been subject to some form of renegotiation, according to consultancy firm Remit.
Strong bands such as Next and JD Sports used their muscle to strike significantly lower deals when leases ended. More struggling retailers, like New Look, have resorted to insolvency proceedings to obtain rental holidays or a change in rents based on turnover.
Tom Wallace, Managing Director of Re-Leased, said: “All eyes are now on September 29 and what the next quarter will bring. With new restrictions announced on September 22 and the rent moratorium extended the week before, there is a strong suggestion that improved rent collection may not materialize.
He added that the owners’ shortfall should not be underestimated. “This is a substantial level of debt that runs into the billions, which puts enormous pressure on homeowners.”
As the months of bad trading continue, the system creaks at every stage. Even the Queen’s finances are under pressure: The Crown Estate has only collected around 52% of the rent due from its commercial tenants. Last week, Shaftesbury, one of the largest landlords in central London, said large companies had paid less than half of the rent owed since March.
Melanie Leech of the British Property Federation, which represents thousands of homeowners, says growing debt is now “too high a mountain for businesses and property owners to climb on their own.”
She argues that when businesses simply cannot pay this debt, the government should provide support through a “rebound subsidy” covering half the rent, while landlords and tenants agree on the amount. way to cover the other half.
The details of the last quarterly rental may put pressure on the government to act.