Re-Leased, the cloud-based commercial property management platform, has published a special report, titled Commercial Real Estate Pandemic Impact Report, charting the effects of the pandemic on the industry since the UK’s first lockdown in March 2020. The report is published just as the Government’s Commercial Rent (Coronavirus) Bill, establishing an unprecedented arbitration system to resolve unpaid rent debt attributable to the pandemic, comes into effect.
The comprehensive report covers the core metrics of: rent collection, assistance provided by landlords, arrears, potential vacancy risk, retention rates, WALT, maintenance, and average rent charged per square foot (sqft). Of particular note is rent collection, which shows the UK’s commercial real estate sector is now at 76%, this is comparable to the 77% of rent collected during the pre-Covid December 2019 quarter. This recovery means rents have recovered 17% since the March 2020 quarter low, when only 59% or rents were collected during the period.
The report further shows that despite this bounce-back, London as a region is still 20% lower than its December quarter 2019 benchmark. There are early signs of recovery for the nation’s capital however, with incremental increases being made each quarter since March 2020.
The report also demonstrates that the pandemic accelerated an increase in rolling leases from 14% as a proportion of all leases in December 2019 to 23% in February 2022. This compounds the disruption already felt in the sector by flex spaces and changing occupier demands before the pandemic began.
Sam Caulton, CFO at Re-Leased, said:
“After two years of lockdowns and uncertainty, the effect of this pandemic on commercial landlords cannot be underestimated. However, it’s promising to see that the industry has stabilised, in some cases outperforming the levels of before March 2020, demonstrating the buoyant nature of commercial real estate.
Amongst the many changes brought about by the pandemic, there are real positives to be taken away as we come out of this difficult period. Landlords, particularly in the office sector, have been given a unique opportunity to understand what their occupiers and potential occupiers want from their space going forward. Now that rent collection has stabilised and the arbitration scheme is in place, we can expect to see a continued evolving of the landlord/tenant relationship.”
Re-Leased’s analysis is based on live rental collection data from over 10,000 commercial properties and 35,000 leases on its UK platform.