Government’s crackdown on landlords in favour of supporting retailers during the coronavirus crisis will ultimately hit the financial wellbeing of the individual man on the street, EG analysis can reveal.
Exclusive analysis from EG’s Radius Data Exchange uncovers the real risk of allowing retailers – regardless of their balance sheets – to dodge paying rent for a quarter without risk of eviction.
Banning landlords from enforcing payment or issuing winding-up orders may be intended to hit big corporates and protect the economy, individuals and jobs, but EG’s data shows they could have the opposite effect.
EG figures reveal that a whopping 900m sq ft of UK retail real estate is ultimately owned by the UK public, through charities, local authorities and institutional investors, as opposed to highly capitalised corporates or sovereign wealth funds.
Of the circa 1.5bn sq ft of retail and food and beverage space in the UK, Radius’s analysis shows that, excluding high streets, as much as 70% is owned by the UK public. It further reveals that of the UK’s top 22 high streets, some 60% is owned by the public. With high streets making up around 80% of UK shopping space, this means that an overwhelming majority of retail property is owned ultimately by the individuals.
The British Property Federation and Revo have all called on government to rethink and reconsider its approach. Now EG stands by them, and the British Retail Consortium, in support of a “furloughed space grant scheme” where the state would cover the fixed costs of businesses that have experienced dramatic falls in turnover. EG also calls for a reconsideration around the temporary ban on the issue of statutory demands and winding-up petitions, announced by business secretary Alok Sharma last week.
That move, according to EG’s data, is likely to hit the public purse and individual landlords harder than government may have expected.
Investment managers – UK pension funds and individual investors – are among the UK’s biggest owners of high street retail by sq ft and number of assets, with a 35.9% share of the retail universe. Add to this the fact that 60% of the investor base of the UK’s retail REITs are pension funds, and public ownership shoots even higher.
Melanie Leech, chief executive of the British Property Federation, said: “As EG’s data makes clear, our financial health as individuals – as well as the future of our high streets and town centres – is intrinsically bound up in the health of the property sector.
“The government’s ban on statutory demands and winding-up petitions takes away all of a property owner’s rights and we are already seeing its impact as tenants that can pay but won’t pay rent, not only in the retail and hospitality sectors but also in offices and industrial, walk away from discussions with their landlords.
“That is not what the government intended, so I urge ministers to call out bad behaviour and be robust in saying well-financed businesses have a legal and moral obligation to meet their financial obligations to pay rent, service charges and other property costs. They can pay, and so they should pay.”
The BPF is in regular dialogue with government to try to thrash out a deal that will secure support for landlords that have lost billions of pounds in unpaid or deferred rents.
Analysis of Q1 rental figures across the major listed retail landlords shows that, on average, just 48.2% of rent was collected, compared with a “normal” Q1 collection rate of almost 80%. This figure is expected to fall further in June, piling more pressure on the nation’s real estate owners.
Additional reporting by James Child
How do you think government should be supporting commercial property owners? Let us know by e-mailing samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
