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In Spite Of Tenant Troubles, Q3 UK Rent Collection Is Better Than Q2

Regent Street

There were widespread fears that when the rent to be paid by UK commercial tenants at the end of September came due, nonpayment figures would be up considerably compared to June. An extra three months of retailers trading at subdued levels, combined with continued government protection for tenants not paying rent, seemed likely to drive down payments. In fact, the opposite proved to be true.

Three weeks after the due date, 77% of rent due was collected from UK tenants, according to new data from Cushman & Wakefield. That compared to 68% collected three weeks after the June rent quarter day

The Q3 data was positively impacted by the reopening of nonessential retail in June, the impact of “eat out to help out” in August, and the return to work — the advice on which has subsequently changed — and school in September. All of this stimulated consumer spending and footfall in town and city centres.

However, the figures are still down on December 2019’s rent collection levels, which stood at 95% at the day 21 point, revealing the extent of the ongoing impact of the coronavirus pandemic.

At day 21, the highest proportion of rent received is from tenants in the offices sector, at 87%, six percentage points higher than the same time for June. Industrial and retail have also seen a significant increase in rent collection levels quarter over quarter. 

Industrial rent collections stand at 77% for Q3, up seven percentage points on the quarter, reflecting the increasing buoyancy of this sector due to burgeoning online sales to consumers.

Whilst retail rent collections are significantly lower than offices and industrial (at 57% at day 21 following the Q3 due date) this is still up significantly on June’s 45%. This increase of 12 percentage points on the quarter is testament to the impact of nonessential retail reopening and the general public’s willingness to get out and spend following a considerable stretch of time at home.

Digging into sub-sectors, there are significant differences in rents received by day 7 in September. Just 13% of pub, bar and restaurant rent due had been paid, whereas hotels are faring much better with 62% paid. 

When it comes to shopping centres, just 47% of rent was paid by day 7 in September, but retail warehousing (68%) was much more successful.

However, while Q3 might have been better than expected, Cushman said recent events mean the rent collected in December is likely to be worse. 

“The national 10pm closing of bars and restaurants, and the fresh advice to work from home if you can, has had a significant impact on footfall which is down 32% year on year,” Cushman UK Head of Asset Services Nick Ridley said. 

“Looking ahead, the Christmas period will be the most important quarter for determining the survival of retailers, and success here will impact December quarter rent collections. It remains to be seen whether consumers will make more practical or more luxurious gift choices over the coming weeks, although it’s likely that supermarkets and homeware retailers will continue to be successful as they have been throughout this crisis.”