The latest research from Remit Consulting indicates that commercial property investors are facing another significant shortfall in income this quarter as the collection rate of rent and service charges for commercial property continues to falter.
The latest figures from Remit Consulting regarding the payments that were due on June Quarter Day show 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 remains 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.