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London-listed property firms up Q3 rent collection rate

[Photo: Freestocks/Unsplash]

London-listed property companies increased the collection rate on the £1.1 billion (€1.2 billion) rent due in the third quarter to 63%, up from 55% in Q2.

Private wealth law firm Boodle Hatfield said the increased rate of collection is partly due to the improved performance of retail and leisure focused REITs. These collected an average of 69% of rent due in Q3, up from 58% in Q2.

The reopening of the hospitality sector during the summer, as well as the UK government’s Eat Out to Help Out scheme, boosted performance significantly before the latest leg of the lockdown started on 5 November in England.

Boodle Hatfield said REITs that invest in healthcare, logistics and social care properties have continued to substantially outperform other sectors, most collecting over 95% of rent due. “The strong performance of these sectors is largely due to the fact that they were able to continue operating during lockdown,” the law firm said in a statement

Despite early signs of recovery in some sectors, the second lockdown will likely slow down the rate of progress in some sectors.

Many commercial landlords continue to offer very flexible repayment options for tenants as a result of Covid. Although tenants are currently protected by the temporary ban on business evictions, this is due to expire at the end of the year.

Light at the end of the tunnel

Simon Williams, head of property at Boodle Hatfield, says: “The improvement in rent collection for September shows there may be a light at the end of the tunnel for both tenants and landlords.”

Williams said that the second lockdown, “will have derailed progress made at a number of REITs – particularly for sectors such as retail where the run up to Christmas is typically its busiest trading period of the year. That’s definitely going to cause concerns for their lenders who have seen their lending covenants breached.”

“While the temporary ban on business evictions has offered a lifeline for many commercial tenants, these protections won’t last forever. Landlords and tenants should be working together to find mutually beneficial solutions to rent arrears and future payment issues.”