The full extent of the shortfall in rent received by landlords as a result of the Covid-19 pandemic became clear this week.
Following rent quarter day on Wednesday last week, all four specialist retail REITs revealed how much rent they collected, with Hammerson receiving 37%, intu 29%, NewRiver 60% and Capital & Regional 50% (see graph).
The marked differences between them largely reflect the varying number of supermarkets and other shops in their portfolios that have been allowed to continue trading since last Monday’s lockdown.
So-called ‘essential stores’ make up just 4% of Hammerson’s UK shopping centre rent roll, whereas they account for 36% of NewRiver’s retail rent roll.
The retailers and restaurant groups that have had to shut their doors have taken different approaches in negotiations over this quarter’s rent bill.
Landlords and agents told Property Week that while some of the high street’s most successful businesses, including Greggs and McDonald’s, paid their rent in full, most pushed for concessions.
Some have requested rent holidays while others have asked to defer payment or pay monthly in arrears.
Many of the biggest names in retail have withheld payment including WHSmith, New Look, Primark, Pret, Joules and Dunelm.
Fashion retailer H&M attracted the ire of landlords by going a step further and asking them to agree to terms that would allow it to walk away from leases with one month’s notice if trading did not return to pre-outbreak levels once stores reopened.
Some retailers have also failed to pay without providing any explanation.
“One of the biggest challenges we are facing is getting hold of people at the retailers, with everyone now working from home,” said NewRiver chief executive Allan Lockhart. “A lot of them aren’t easily contactable to have a discussion about rents that they haven’t paid.”
One small fund manager also said last Friday that it had still not received rent from a supermarket chain and a cash-and-carry, and that the only explanation offered for the delay was that systems were running slower than normal because of the crisis.
There is widespread fear that if the lockdown continues beyond May, landlords could find the next quarter day in June even more challenging.
In a note to clients on Monday, Knight Frank, which estimated that only around a third of retailers paid their quarterly rent in full last week, warned that cashflow pressures on retailers would only intensify.
“Any landlord expecting a double payment in Q2 needs a severe reality check and we would venture that some are in denial as to the depth of the issue,” said Stephen Springham, head of retail research at Knight Frank.
When and how retailers will repay deferred rent remains to be seen. British Land has offered to defer £40m in rent due from larger retail, hospitality and leisure tenants and spread repayment over six quarters from September.
But some retailers are loath to commit to deals that involve paying high levels of rent as soon as they reopen.