Institutions and other investors in the UK property sector experienced a shortfall of over £1.5 billion in rental income over the period of the March quarter, with over half of the shortfall being due from the retail sector, according to the latest research by Remit Consulting.
“The finalised figures for the total rent collected 90-days after the March Quarter Day reveal that, overall, just 82% of payments due were received by institutions and other property investors in the UK market. Based on data from the IPF, regarding the total value of UK property investments, this equates to a shortfall of £1.5 billion over the three-month period with the retail sector accounting for £780 million of this total,” said Steph Yates, senior consultant at Remit Consulting.
“The data for the beginning of the current quarter shows that collection rates are on an almost identical trajectory. With average collection on the June due date over 11% lower than three months earlier, investments in the UK property could see an even bigger shortfall this quarter,” she added.
Melanie Leech, Chief Executive, British Property Federation said: “The pensions and savings funds invested in commercial property clearly cannot continue to sustain rental losses on this scale, fuelled by the Government moratorium on property owners’ rights of action which has encouraged well-capitalised businesses to ignore their rental obligations. Those who can pay should pay. Meanwhile for the hardest hit tenants forced to stop trading and unable to meet their rental debts, we continue to work with other property owner and occupier trade bodies to press government for support to help them with their fixed property costs.”
Phil Clark, Global Head of Real Assets Equity at Kames Capital, said: “The pandemic has created a shock that is still rippling through the economy and not surprisingly a number of commercial property tenants have seen revenues decline and are struggling to meet their rent obligations. This also has a direct impact on our clients who are pension funds. The majority of responsible tenants and investors are working together to find reasonable solutions for both parties but there is no avoiding the fact that some businesses simply won’t be able to pay and some pension funds will receive less income as a result.”
Remit Consulting has been studying the collection of rent and service charge payments by the UK’s biggest property management companies since the start of the Covid-19 lockdown in March. The firm has been working with the British Property Federation, RICS, PIA, Revo and other professional bodies, and based upon the analysis of 125,000 property leases,