UK listed property companies collected just 67% of the
£1.1bn in rent they were due on the last quarter day in June, new
analysis of real estate investment trusts reveals.
Landlords
of alternative property classes such as healthcare, social care, logistics and
student housing saw the highest collection rates, receiving more than 90% of
rents due, according to the report from law firm Boodle Hatfield.
The REIT sector’s performance was dragged down by particularly
low collection rates among property industry giants such as Hammerson and Land
Securities.
However, the percentage collected by listed property companies
is significantly higher than the amount collected by private property
landlords.
Research from law firm Osborne Clarke suggests that the overall
percentage of rents collected by non-listed private landlords in the last
quarter was as low as 20%.
Retail- and leisure-focused REITs collected just over 54% of
rent due in June, compared with almost 70% for the previous quarter. These
sectors were particularly hard hit by the lockdown, which almost wiped out
their income and, with it, their ability to pay rent. For example, Hammerson,
which is focused on retail, collected only 16% of its rent roll for the last
quarterly period.
Boodle Hatfield believes the next quarterly rent instalment, due
next Tuesday, is likely to see many businesses still unable to pay their rent,
especially those in the retail and leisure industry, which are still trying to
make up for sales lost during lockdown.
A number of businesses have resorted to company voluntary
arrangements (CVA) to cut costs. Many CVAs in the retail sector have involved
demands for significant rent reductions. These have been criticised by some
landlords, who argue that they are being used by solvent business to strong-arm
landlords to cut rents and improve the retailer’s profitability rather than
stave off insolvency.
Outside of the CVA process, landlords have been inundated with
requests for rent cuts and a shift to turnover-rents.
Simon Williams, head of property at Boodle Hatfield, said: “Rent
collection rates have taken an unprecedented hit during lockdown and commercial
landlords aren’t optimistic that the next payment day will be much better.
“It is going to be quite some time before businesses achieve
profits at the same level as pre-lockdown. Their view is that landlords need to
share some of that pain with them. It is hoped that this tension between
landlords and tenants can continue to be resolved by negotiation.”