Rent collection of LSE listed property companies shows signs of recovery

London Stock Exchange (LSE) listed property companies collected 63% of the £1.1bn due in rent last quarter (September), up from 55% in June, says Boodle Hatfield, the leading private wealth law firm.

The increase in rent collection is partly due to improved performance at retail and leisure focused REITs, which collected an average of 69% of rent due in the September quarter, up from 58% in June. The reopening of the hospitality sector during the summer, as well as the Government’s Eat Out to Help Out scheme, has boosted performance significantly before the latest leg of the lockdown started on November 5.

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

Boodle Hatfield says despite early signs of recovery in some sectors, the impact of the second UK lockdown will likely slow down the rate of progress in some sectors. Retailers have missed out on a crucial part of Christmas trading in the last month and will have to catch up on lost revenue when ‘non-essential’ shops are permitted to re-open on December 2nd.

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.

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.”

“Having said that, the second UK 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.”