It is a critical day for the UK’s commercial landlords as they attempt to collect £2.5bn in rent from their struggling tenants, including retailers, restaurants and pubs.
Wednesday marks the second so-called quarter day, one of the year’s four occasions when rent is paid for the following three months.
The previous rent collection day, in March, fell just after lockdown was imposed, meaning many businesses that had been forced to close their doors failed to pay rent in an attempt to save cash. As a result, commercial landlords collected only about half of what they were owed.
JD Sports is understood to have been in discussions with its landlords since March, and has paid some of that quarter’s rent in full or at a reduced rate, but is still negotiating with others about what it will pay in June.
A Boots UK spokesperson said the high-street chemist was negotiating rent and service charge payments with some of its bigger landlords because of the impact of the pandemic on its business and would not be paying those rents on Wednesday.
“While we have reached revised agreements with many landlords, where discussions are ongoing, we continue to pause some payments as we seek to find an equitable and fair solution,” the spokesperson said.
Property analysts expect landlords to collect even less in rent in June than they managed in March, with shops, pubs and restaurants having been closed for three months.
Some landlords will receive less than 20% of what they are owed this week, according to real estate lawyer Ian Wilkinson, a partner at law firm Osborne Clarke.
The amount of rent collected will vary according to sector, Wilkinson adds, forecasting that leisure and hospitality business will be among the least willing to pay their landlords, most likely less than 20%, as they have been working to agree concessions with their landlords for the rest of this year.
Wilkinson believes less than 30% of retailers will pay rent on the due date, while landlords who rent offices or space to logistics companies may fare better as they have seen demand for their services grow during the coronavirus crisis.
“In both retail and leisure and hospitality, the collections will be patchy and very much determined by things like location, local conditions, on-line sales and insolvency processes,” Wilkinson said.
“We expect a grim day,” said Ramzi Kattan, a real estate analyst at the credit rating agency Moody’s Investors Service, adding that most landlords would likely collect less than half of what they are due.
“Weaker cashflow, struggling tenants and reduced demand for commercial space will weaken credit metrics and contribute to a more challenging operating environment. Retail landlords will be particularly hard hit.”
Many businesses are looking to renegotiate their rent with landlords, including the brand Go Outdoors, owned by the retailer JD Sports, and which specialises in fishing and camping gear.
JD Sports appointed administrators at Deloitte for Go Outdoors, which has 67 stores employing about 2,400 staff, and then bought back the brand.
Deloitte will focus on renegotiating rental terms with Go Outdoors’ landlords.
Landlords who cannot collect rent have few options beyond continuing discussions, as the government has banned commercial landlords from taking legal action against non-paying tenants until the end of September.
The majority of property owners and occupiers were working well together, said the British Property Federation, although it warned that 45 million people in Britain invest in property through their pension.
“Well-financed businesses who are able to pay their rent should do so, otherwise you undermine property owners’ ability to support those businesses who truly need it,” said Melanie Leech, the chief executive of the BPF.