The rent debt crisis which has dogged UK high streets during the pandemic shows little sign of abating, with figures published on Friday highlighting that landlords still face huge rent shortfalls.
Commercial property owners collected less than a fifth of what they were owed on Friday, when rent was due for the three months to the end of September, according to commercial property management platform Re-Leased.
The 18 per cent collection rate is the lowest recorded in a year. Commercial rents are typically paid quarterly and in advance and, at the last quarterly payment date in March, 21 per cent of rent was paid on time.
Rent payments will continue to trickle in over the coming days and weeks, as landlords and tenants reach compromises on what will be paid and when, but the low take is a concerning sign that the impasse on the high street is far from over.
“While there isn’t an immediate need to worry that the numbers are a few basis points down to last quarter, it does demonstrate that landlords are struggling with consistent liquidity — we’re still talking about a significant proportion of rent each quarter not being collected,” said Caleb Dunn, analyst at Re-Leased.
During the past 15 months, rent debt has built up as shops, bars and restaurants have been forced to close. Total arrears are estimated by industry bodies to be in excess of £6bn.
With efforts to fully reopen the economy stalled by the rapid spread of the Delta variant of coronavirus, the prospect of that being paid off rapidly looks slim.
“The delay to the easing of Covid restrictions in the UK is clearly reflected in the low average of rental collection and the numbers are more sluggish compared to the last quarter,” said Dunn.
Landlords had been hoping that the government would provide some respite by lifting bans on evicting commercial tenants and pursuing them for unpaid rent, which have been in place since last March.
But despite industry lobbying, ministers opted to keep the bans in place until next March, enraging property owners who claim that a number of well-capitalised businesses are withholding rent under the cover of government protections.
Melanie Leech, chief executive of landlord body the British Property Federation, described the rent take as “frustrating . . . when our high streets have reopened, and most businesses are trading and benefiting from an economic bounce back”.
“We’re at a critical point in time where the government is keen to make progress on levelling up and building back better,” she said, “yet the combined impact of the rent moratoriums, CVAs and punitive business rates is seriously undermining the attractiveness of UK real estate for pension funds and responsible, professional property investors. This will cause serious damage to UK town centre recovery.”
Rent collection figures were particularly poor in the retail sector, with just 14 per cent paid on Friday, according to Re-Leased.
A quick fix is unlikely, said Paul Martin, UK head of retail at KPMG. “Retailers are still making up for a lot of lost ground where their doors have been closed for much of this year and battling the huge shift to online shopping . . . it will take time for some to be able to get to a point where they can start to meet their rent payments,” he said.