Retailers in the UK have paid less than 15 per cent of their rent, according to initial figures from Wednesday’s quarterly payment date, piling pressure on landlords whose incomes have been cut deep by coronavirus.
Rent receipts on June 24, the day commercial tenants’ payments were due for the following three months, were even lower than those for the previous quarter, according to data from Re-Leased, a commercial property management platform.
Retailers paid just 14 per cent of the rent due, compared with 20 per cent at the same point after the March 25 payment date, leaving landlords waiting for £2.15bn in unpaid rent for the June quarter.
The data indicate “the severity of the crisis and quantifies the pressure both landlords and tenants are under. Looking at the level of rent that was collected on due date is sobering,” said Tom Wallace, chief executive of Re-Leased.
The analysis of 35,000 commercial leases provides the first indication of how landlords fared on rent day.
Across all commercial tenancies, receipts were 18 per cent on Wednesday, compared with 25 per cent on the March payment day. Office landlords saw the sharpest decline, from 31 per cent to 23 per cent.
The vast majority of office tenants eventually paid for the March quarter, but with many offices closed by the pandemic, there is less confidence that the rent shortfall will be made up.
Landlords had been braced for a painful day on Wednesday, with some of those heavily exposed to struggling sectors such as hospitality and retail expecting to recoup only 10 per cent of the rent owed to them.
Non-essential retailers were allowed to reopen on June 15, but trade remains limited by social-distancing restrictions and footfall for the week following the wider reopening was less than half normal levels.
Some retailers, including Boots, JD Sports and Primark, are paying depending on progress made in talks over the arrears from the March quarter and future lease arrangements. Pret A Manger, the sandwich chain, has told its landlords it will pay just 30 per cent of rent.
Primark said it was “making progress” in talks about “an equitable outcome for the 12-week period when we were not trading . . . June payments will be made in accordance with these agreements”.
Boots, most of whose stores stayed open during lockdown, said it remained in talks with larger landlords but had “paused some payments” pending agreement.
Others retailers, such as New Look, Hennes & Mauritz and Sports Direct, are pushing for turnover-linked leases. One institutional landlord said initial requests to share the burden of lockdown were turning into “an opportunity to completely restructure the leases” and that the moratorium on evictions meant landlords had “no tools left in the kit”.
He added that mid-market fashion chains that were struggling before Covid-19 were now threatening fresh insolvency processes. “They’re all coming back for a second bite of the cherry. They’ll tell you they’ve got Deloitte or KPMG on standby and then ask for turnover leases.”
According to Vivienne King, chief executive of lobby group Revo, company voluntary arrangements and prepack administrations are being used “in a way which runs contrary to the government’s commercial property code of practice, before the ink is even dry”.
JD Sports on Tuesday pushed Go Outdoors, a chain of 67 outdoor pursuits stores, through a prepack administration clearly aimed at resetting leases that it considered too long, expensive and inflexible. It called for “realism and flexibility” in negotiations over new leases.
More retailers are expected to pay in the coming days as talks with landlords continue. But one shopping centre owner cautioned that over the next quarter “getting above 30 per cent [of rent due] would be an achievement”.