Retail rent arrears "to exceed £2bn" as landlords predict lower payments
Retail rent arrears are set to exceed £2 billion as landlords anticipate receiving less than half of due payments for the third quarter of 2020, an industry body has warned.
Revo said landlords are expecting another set of low payment figures after Tuesday’s deadline for quarterly rent.
“Retail property owners are braced for another hugely damaging quarter with fears that once again less than 50% of rent due will be paid by operators whatever their balance sheets," said Revo CEO Vivienne King.
The organisation said landlords saw around £1.5 billion of rent payments go unpaid during the first and second quarters of the year.
Retailers and hospitality businesses have held off rent payment or agreed delayed payments due to a ban on business evictions until the end of the year.
The ban, put in place at the start of the pandemic to protect struggling firms, was due to expire at the end of the month but was recently extended amid continued pressure from coronavirus restrictions.
The Government said it will also extend the ban on landlords using bailiffs to enforce unpaid rent on these commercial leases until the end of the year.
King said the extension has fuelled confidence for “well-heeled” tenants to “continue exploitation of a system intended to protect businesses in genuine distress”.
She said: “There is little justice in singling out property owners as the fall guys to indiscriminately compensate large and valuable operators for their cashflow.
“But having done so, the repercussions will reverberate through the economy for years to come as the capital for regeneration dries up, investors look to safer havens elsewhere and anyone who has put their savings into retail property faces huge losses.
“Moreover, with the rental shortfall in the retail sector alone set to exceed £2 billion, the stress may begin to have material impacts on credit supply if lenders find themselves overwhelmed by defaulting borrowers.”
Retail and hospitality tenants have also benefited from a business rates holiday for the year to 31 March. However, property landlords will still have to pay business rates on empty units.
Robert Hayton, head of property tax at Altus Group, said: “Despite a £12.18 billion UK-wide business rates holiday, whilst landlords are precluded from enforcing rent arrears, they are also precluded from that holiday on impossible-to-let retail, leisure and hospitality premises.
“The lack of tax parity with tenants is not only unfair, given the part they are being asked to play, but their tax burden is now increasing exponentially through insolvencies as more properties become vacant.”