Land Securities, one of the UK’s largest commercial landlords, collected two-thirds of the rent owed by tenants in March, with income showing little sign of improving more than a year into the pandemic.
Retailers and hospitality businesses in Landsec’s £11.8bn portfolio have been hit hard by repeated closures due to coronavirus. In London, those businesses paid just £2m of the £7m they owed for the most recent quarter. Regional retailers fared marginally better, paying £5m of the £13m owed.
Commercial tenants typically pay rent in advance for a three-month period and the most recent payment date was March 25. Landsec’s collection figures are accurate from March 30, five days after payment was due.
Landsec’s rent collection has barely improved during the pandemic. The company, which has a portfolio spanning large offices in London’s Victoria and the City and shopping centres including One New Change near St Paul’s Cathedral and Westgate Oxford, collected an almost identical proportion of rent for the three months from March 2020, the first period affected by Covid-19, as it did for the latest quarter.
Landsec established an £80m fund for struggling tenants a year ago, half of which has been paid out. The landlord is anticipating handing out more funds as businesses that have been closed for much of the past 12 months attempt to reopen.
From April 12, an easing of restrictions meant that outdoor pubs, non-essential retailers and hairdressers were allowed to reopen in England. But many of those businesses have built up rent arrears over a full year and the concern for tenants and landlords is what happens to that debt as the economy tentatively restarts.
According to Remit Consulting, which monitors UK-wide rent collection, more than £5bn of unpaid rent has built up over the pandemic. The low rent take from UK businesses in March represented “the poorest start to a financial quarter since June last year”, said Laura Andrews, assistant consultant at Remit.
A government ban on evicting commercial tenants, in place throughout the pandemic, is due to end on June 30, at which point landlords will be able to pressure tenants to pay arrears.
“The focus now will be on the extent to which tenants, especially retail, do not reopen when the moratorium on evictions ends . . . and the various government life-support measures for closed businesses and furloughed employees end,” said John Cahill, an analyst at Stifel, in a note to clients.
Retail rents were likely to fall after the pandemic as landlords such as Landsec fought to keep premises occupied, he added.
Office tenants, which make up more than half of Landsec’s rent roll, have performed better through the pandemic, with the landlord receiving 87 per cent of the £61m it was due from them.
Derwent London, another major landlord with a portfolio overwhelmingly focused on offices, received 87 per cent of the £42m it was due for the quarter.