Tenant Rent Arrears

06.10.21 3 MINUTE READ

One the Square, CB1, Train Station

The UK was in lockdown three times from March 2020 to March 2021 (retail and restaurants & leisure for approximately 7.2 months and 8.9 months respectively). Footfall, as reported by the Cambridge BID, is still 36% down on the average footfall recorded between 2015 and 2019. The consequential loss of business to retailers and leisure operators due to the loss of custom from city centre office users, tourists, students has been devastating.

No two businesses have been affected in quite the same way and there is also no doubt that lockdown accelerated the pre-Covid trends away from retail (impact of online shopping) and casual dining (oversupply).  We found that certain businesses were not impacted at all such as banking (although they continue to review their holdings) and convenience shopping (which actually increased trade) but other areas have experienced  potentially business-ending consequences.

The retail sector can be divided between small independent owner drivers and the national multiples but both have required support. The leisure sector tended to split between coffee shop/patisseries, public houses/restaurants and hotels.  Each has been affected in its own way but certainly all the major operators will have paid their rent in full by the end of 2021. 

Our experience with colleges in both Oxford and Cambridge has been to accept a range of rent write-offs, deferments, monthly in advance as opposed to quarterly in advance payments, concessions, extended lease terms, or a mix of two or more of the above. Turnover rents have been proposed as an equitable way to progress but achieving full transparency particularly among the smaller independents  with less sophisticated management accounting systems makes timely and accurate reporting and rent collection difficult and management intensive. 

We have found that the vast majority of the independents paid little or no rent and it has either been written off or may have to be written off.  The major multiples have deferred payments, extended leases and will either pay the majority or all of the rent arrears or perversely will have gone into administration or liquidation!

Thankfully, most tenants are now paying rent, if only a percentage of the quarterly rent tapering up quarter by quarter until returning to full rent by December 2021 or March 2022.  Some colleges are still deciding what to do on the basis that the true outcome of Covid and what it means in terms of business closures is yet to be realised and they are protecting their position from an insurance loss of business perspective and potential insolvencies after Christmas.

Although no two portfolios are the same, we anticipate that with a well balanced portfolio, colleges may be writing off upto 10% to 20% of one year's equivalent contracted rent roll, which in the circumstances is a satisfactory outcome.

However, much will depend on how Covid itself plays out through the winter and if the retailers and leisure operators experience the bounce back in Christmas trade they so desperately need.


Get in touch with our team


Max Bryan

Partner, Head of Laboratory & Office Agency

Max works with pioneering innovators and tech entrepreneurs, leading our unparalleled offices and labs agency team.

Read more

Search Bidwells