UK’s commercial landlords are reducing rents, with 30 per cent more rent reductions between March and June 2020 compared with the same period previous year
Commercial landlords are being more flexible with tenants, reducing rents and offering shorter leases to get through the Covid-19 crisis, research has found.
Real estate solutions software MRI Software has revealed that across the retail, industrial and office spaces, as well as some mixed-use properties that include residential elements, there were 30 per cent more rent reductions from March to June 2020 than during the same period last year.
The number of rent reductions logged on MRI Horizon were up by 46 per cent in March, 82 per cent in April, 27 per cent in May and 11 per cent in June, compared to the same months in 2019.
Meanwhile, the average terms of new leases were down year-on-year from 69 months on average for March to June in 2019 to 52 months on average for the same period this year, leaving tenants locked in for shorter periods.
These measures are to combat commercial tenants struggling to pay their rent and the falling number of new leases being offered.
The proportion of outstanding rent payments increased to 52 per cent in August (£144m) while from March to August the number of new leases dropped by 33 per cent year-on-year.
The findings provide a snapshot of how the coronavirus pandemic is affecting commercial property in the UK, said Colin O’Reilly, sales director for investor solutions at MRI. The data clearly shows how the crisis continues to shape every property company’s lease portfolio and strategy and the struggles faced by businesses using retail, office and industrial spaces.
Leases are often one of the most expensive assets on a company’s balance sheet and will be one of the first things looked at when cost-cutting and other business rationalisation measures are considered. Our data shows that landlords and tenants are working together to find flexible solutions during these unprecedented times, O’Reilly said.
In contrast to the commercial market, residential property has been booming.
The Nationwide house price index has showed that annual house price growth has risen from 3.7 per cent in August to five per cent in September, the highest since September 2016.
Prices increased by 0.9 per cent month-on-month in September, following a two per cent rise in August.
The rebound reflects a number of factors, said Robert Gardner, chief economist at Nationwide.
Pent-up demand is coming through, with decisions taken to move before lockdown now progressing, he said.
Gardner said, the stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown.
