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Just 12% or retail rents collected on September rent day.


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https://www.propertyweek.com/news/just-over-12-of-retail-rents-collected-on-september-quarter-day/5110341.article#.X3WTDpUhwpA.twitter

"UK retailers have paid just over 12% of rent for the last quarter so far, with commercial landlords scraping in just over 22% at quarter rent day on 29 September"

So if this is the case is that not absolutely mental?

If you about to complete on an overpriced house blasé in talk that this only impacts poor folk the shit is going to get real down the line.

At some stage this debt has to either be paid / defaulted on and/or negotiated.

 

 

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Residential and commercial are quite different. 

Everyone knows the bricks and mortar retail stores are taking an absolute hammering from online retailers, couple this with lockdown and people afraid of going out to shopping centres and its a perfect storm.

Residential is different I think now as most lenders will be flexible on mortgage holidays in this current environment. If you think since the great recession in 08, most deposits had to be above 10/20%, i would doubt that many lenders have significant negative equity on their books so its cheaper for them to keep someone in there and put them on a mortgage holiday than reposting the property.

I wouldn't conflate retail property with residential though as retail property is taking a massive hit long term.

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I wouldn't conflate retail property with residential though as retail property is taking a massive hit long term.

Absolutely - both will take a hit in a recession, but commercial will never recover; essentially we barely need bricks and mortar stores at all any more, but we for sure still need houses (even if we don't need them to cost 6x salary).

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It is the rents that are the problem........any retail shop that owns and can adapt will survive.....like tennant farmers or publicans they will feel more pain than owner outright.....even at zero debt interest, there is a time and a place to leverage up invest and expand...and a time and a place to do the opposite.;)

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Residential and commercial are quite different. 

Everyone knows the bricks and mortar retail stores are taking an absolute hammering from online retailers, couple this with lockdown and people afraid of going out to shopping centres and its a perfect storm.

Residential is different I think now as most lenders will be flexible on mortgage holidays in this current environment. If you think since the great recession in 08, most deposits had to be above 10/20%, i would doubt that many lenders have significant negative equity on their books so its cheaper for them to keep someone in there and put them on a mortgage holiday than reposting the property.

I wouldn't conflate retail property with residential though as retail property is taking a massive hit long term.

That is obvious

I do not assume that the problems are limited to retail either I have no doubt that lots of hotels, pubs and offices will not have their rents paid this month.  

It will be very interesting to see what the stats are for residential rents once evictions are allowed.

Looks like circa xx% of tenants not paying but that is at the moment and i would expect that the accelerate once the furlough scheme comes to an end.

https://www.lettingagenttoday.co.uk/breaking-news/2020/9/huge-loss-of-income-buy-to-let-counts-the-cost-of-coronavirus-crisis

 

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That is obvious

I do not assume that the problems are limited to retail either I have no doubt that lots of hotels, pubs and offices will not have their rents paid this month.  

It will be very interesting to see what the stats are for residential rents once evictions are allowed.

Looks like circa xx% of tenants not paying but that is at the moment and i would expect that the accelerate once the furlough scheme comes to an end.

https://www.lettingagenttoday.co.uk/breaking-news/2020/9/huge-loss-of-income-buy-to-let-counts-the-cost-of-coronavirus-crisis

 

You also cant chase Retail rents at the moment - until 31st December.

 

Plenty of large chains, who could pay are just flat out refusing to. Boots, anyone backed by PE, Next, Superdrug etc etc. These are used examples by landlords pointing out how unfair it is - as all of them have traded well throughout this year. 

 

They would just rather the cash on their balance sheets and will use the build up of arrears to try and negotiate a discount, despite being able to afford it... ah the joy of business.  

 

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You also cant chase Retail rents at the moment - until 31st December.

 

Plenty of large chains, who could pay are just flat out refusing to. Boots, anyone backed by PE, Next, Superdrug etc etc. These are used examples by landlords pointing out how unfair it is - as all of them have traded well throughout this year. 

 

They would just rather the cash on their balance sheets and will use the build up of arrears to try and negotiate a discount, despite being able to afford it... ah the joy of business.  

 

"Just 12%" is truly shocking! 

Presumably the commercial landlord can use "peaceful re-entry " to lock them out & forfeit the lease if the commercial after 31st Dec if the eviction ban is not extended . However, I thought a tenant could be locked out without going to court after 21 days, but has this been extended in recent years ? 

Commercial leases in a time of COVID-19

https://www.farrer.co.uk/news-and-insights/commercial-leases-in-a-time-of-covid-19/

There may als be complications here with CRAR

How has the Coronavirus Act 2020 affected Commercial Rent Arrears Recovery - CRAR?

https://www.rocketlawyer.com/gb/en/quick-guides/commercial-rent-arrears-recovery-crar

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"Just 12%" is truly shocking! 

Presumably the commercial landlord can use "peaceful re-entry " to lock them out & forfeit the lease if the commercial after 31st Dec if the eviction ban is not extended . However, I thought a tenant could be locked out without going to court after 21 days, but has this been extended in recent years ? 

Commercial leases in a time of COVID-19

https://www.farrer.co.uk/news-and-insights/commercial-leases-in-a-time-of-covid-19/

There may als be complications here with CRAR

How has the Coronavirus Act 2020 affected Commercial Rent Arrears Recovery - CRAR?

https://www.rocketlawyer.com/gb/en/quick-guides/commercial-rent-arrears-recovery-crar

Yes - the current ban is extreme. Landlords cant do basically anything till end of Dec now, was extended from end of September recently. Its nonsense to be fair. Meant to just be used by "struggling firms" but everyone plays the game of course.

 

 

The 12% isnt shocking in a lot of ways. If i was a retail FD why pay now? Id rather keep the cash till I have to thanks.

Under current law the landlord cant even send a threatening letter.

Yes the debt builds up to X amount but gives me leverage when they stop kicking the can down the road... Who do you give the discounted rent going forward to? Tennant A, who has no arrears. Or Tennant B, who owes £10million across 50 sites... ill pay up if you knock 25% off the rent going forward...

Otherwise lock the doors and see who your takers are in this environment. 

 

Edited by captainb
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Yes - the current ban is extreme. Landlords cant do basically anything till end of Dec now, was extended from end of September recently. Its nonsense to be fair. Meant to just be used by "struggling firms" but everyone plays the game of course.

 

 

The 12% isnt shocking in a lot of ways. If i was a retail FD why pay now? Id rather keep the cash till I have to thanks.

Under current law the landlord cant even send a threatening letter.

Yes the debt builds up to X amount but gives me leverage when they stop kicking the can down the road... Who do you give the discounted rent going forward to? Tennant A, who has no arrears. Or Tennant B, who owes £10million across 50 sites... ill pay up if you knock 25% off the rent going forward...

Otherwise lock the doors and see who your takers are in this environment. 

 

If the LL does lock them out, will they have to pay the biz rates ? 

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The landlords can just bankrupt the current tenants, throw them out, then wait. 

Not sure they have to pay any rates if the property is empty. 

With rich tenants, they can just sue them later for the full amount. 

New leases may have to go down, but most premises are on leases which last decades. And they're all upward only rent review. 

So we're talking boarded up high streets for a few years. ( And no chance of lower rents initially )

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22 minutes ago, 24gray24 said:

The landlords can just bankrupt the current tenants, throw them out, then wait. 

Not sure they have to pay any rates if the property is empty. 

With rich tenants, they can just sue them later for the full amount. 

New leases may have to go down, but most premises are on leases which last decades. And they're all upward only rent review. 

So we're talking boarded up high streets for a few years. ( And no chance of lower rents initially )

Not at the moment. They can't do diddly squat till end of December which is why rent collection is so low. 

Yes, there's a grace period then the landlord is liable for buisness rates which can be 30% of what would have been the rent due. Not small fry. 

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Anecdotal:-

I was walking the dog around my old work site yesterday. Its a modern industrial office park type place; landscaped grounds and ponds etc etc. The type of place that litters the M4 corridor. In among the offices are the little privately owned cafes and snack bars, barbers and so on. Lots of greenery, either open grass or nice little woodland areas.

On the same estate is a medium sized shopping complex with cinema and the inevitable associated restaurants and corporate coffee houses/cafes. Tesco, M&S, WH Smith etc etc.

The shopping complex looked OK...no where near as many people as a "normal" lunch but the large car park was half full. I suspect the all business are on 50 - 75% rations there...some were gone for good. I doubt that the rule of six is helping the smaller shops much!

As for the office areas;- in the "old days" it would be packed with people just walking around enjoying a break and getting their pedometers up to 10,000 steps; cars would normally be parked EVERYWHERE.

Not now. It was like a cross between the Omega Man and I am Legend films (yes I know they are based on the same book). The big car parks were 95% empty, the road kerbs were clear, there was not a sole about and it was so quiet it was almost eery.

I had a coffee in one of the privately owned cafes and the owner said that they are on 15% of normal business. Others were shuttered up.

It was almost like a nature reserve...but the groundsmen were all out maintaining the place.

That was yesterday in the pleasant weather. God knows what it will be like today on a stormy Friday.

How much longer into this winter can this sort of thing go on for?

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Not at the moment. They can't do diddly squat till end of December which is why rent collection is so low. 

Yes, there's a grace period then the landlord is liable for buisness rates which can be 30% of what would have been the rent due. Not small fry. 

I'm not on the side of landlords, but I can see how they think: 

25 year lease (say), not been paid since March,  tenant either making money as normal ( through online sales) or b) not making any and both demanding to reduce rent by half (and be stuck with that for 25 years even if it's back to normal in 2)

What will they do? 

I'd say with a) they'll refuse a rent reduction and Sue.  And with b) forfeit the lease, leave it empty then wait and see. 

As for grace periods and paying rates, they can spin it out and delay that with refurbishment plans etc. 

Given a long lease ( the norm), they will hang tough in my view. For at least a couple of years. 

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How much longer into this winter can this sort of thing go on for?

I would politely suggest you and all of us consider the possibility that they are not intending to relent.

Imho based on false science , testing and employing main stream media to reinforce their data to install fear and compliance of their draconian policies. 

I was pleased to see a few MPs standing up for our liberties by calling them out particularly MP Desmond Swayne a couple of days back.

Pushing laws and acts through parliament at 5 pm in the afternoon without debate which takes away our freedom is  not on ! Surely we can all agree on that. 

Forced to wear a mask to get food and supplies,  work etc.

What comes next ? Cant shop , work, travel , attend meetings without vaccine? 

 

How do tyrannies happen ? Until very quickly. 

Scary times 

 

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Anecdotal:-

I was walking the dog around my old work site yesterday. Its a modern industrial office park type place; landscaped grounds and ponds etc etc. The type of place that litters the M4 corridor. In among the offices are the little privately owned cafes and snack bars, barbers and so on. Lots of greenery, either open grass or nice little woodland areas.

On the same estate is a medium sized shopping complex with cinema and the inevitable associated restaurants and corporate coffee houses/cafes. Tesco, M&S, WH Smith etc etc.

The shopping complex looked OK...no where near as many people as a "normal" lunch but the large car park was half full. I suspect the all business are on 50 - 75% rations there...some were gone for good. I doubt that the rule of six is helping the smaller shops much!

As for the office areas;- in the "old days" it would be packed with people just walking around enjoying a break and getting their pedometers up to 10,000 steps; cars would normally be parked EVERYWHERE.

Not now. It was like a cross between the Omega Man and I am Legend films (yes I know they are based on the same book). The big car parks were 95% empty, the road kerbs were clear, there was not a sole about and it was so quiet it was almost eery.

I had a coffee in one of the privately owned cafes and the owner said that they are on 15% of normal business. Others were shuttered up.

It was almost like a nature reserve...but the groundsmen were all out maintaining the place.

That was yesterday in the pleasant weather. God knows what it will be like today on a stormy Friday.

How much longer into this winter can this sort of thing go on for?

I dont think it can everything seems to be aligning at the end of the year.

This video was posted by another member ages ago.

 

If this is correct and one mans bill/rent/debt is another mans income/asset then this scenario is the economic machine in reverse.

Whilst the debt is being defaulted/repaid/negotiated people wont be receiving this income and they themselves may well (considering how much leverage is out there) default/repay/negotiate in return.

That will then ripple out and reduce the money in the economy logically and cause a massive deflation.

All the government have done at the moment is pause the crisis which may feel good but is worse ongoing as even those whom profit from crisis value investors/people with money who could not afford houses prices/rents before and services such as auctioneers/insolvency experts etc etc are not busy either.

A highly leveraged global economy is just not designed to be cut off and locked up its more like a shark that needs to keep moving all the time to survive.

The holiday season is starting to close around here I fully expect almost all rented hospitality businesses to have not paid their rent traded over summer and then throw in the towel once the furlough and rental amnesty is over.  There is no logic not to do this and government policy has made it the only way to escape with some £££




 

 

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You also cant chase Retail rents at the moment - until 31st December.

 

Plenty of large chains, who could pay are just flat out refusing to. Boots, anyone backed by PE, Next, Superdrug etc etc. These are used examples by landlords pointing out how unfair it is - as all of them have traded well throughout this year. 

 

They would just rather the cash on their balance sheets and will use the build up of arrears to try and negotiate a discount, despite being able to afford it... ah the joy of business.  

Very interesting point.

However I can see some government intervention in the sense that they will need to act if their revenues are falling with lower business rate collection. The obvious target would be a digital sales tax on online retailers which would help the store retailers better competed with them.

Can't see the high street fully dying but definitely evolving into something else - maybe more local shops instead of big names.

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Very interesting point.

However I can see some government intervention in the sense that they will need to act if their revenues are falling with lower business rate collection. The obvious target would be a digital sales tax on online retailers which would help the store retailers better competed with them.

Can't see the high street fully dying but definitely evolving into something else - maybe more local shops instead of big names.

Depends what it is - food, clothing etc will always typically want a physical presence i would suggest.

I also dont see the high street fully dying.

A little known / or maybe not, is that most retailers lose cash from the online division (includes the supermarkets). Its being propped up by the bricks and mortar bizarrely.

Issue they have is stock, returns (which can be a huge % ) and of course labour and delivery charges. 

Business rates are a 1950s tax and need reform as well. Personally i would abolish and add a couple of % points onto VAT - and make Amazon, Ebay and co collect it as well. Current system of chinese sellers collecting the 20% as profit and never handing it over has to stop.

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Depends what it is - food, clothing etc will always typically want a physical presence i would suggest.

I also dont see the high street fully dying.

A little known / or maybe not, is that most retailers lose cash from the online division (includes the supermarkets). Its being propped up by the bricks and mortar bizarrely.

Issue they have is stock, returns (which can be a huge % ) and of course labour and delivery charges. 

Business rates are a 1950s tax and need reform as well. Personally i would abolish and add a couple of % points onto VAT - and make Amazon, Ebay and co collect it as well. Current system of chinese sellers collecting the 20% as profit and never handing it over has to stop.

Don't forget socialising and actually seeing the goods. 

Ebay is awash with items that don't turn out like they looked in the photo. Seeing is often vital. 

And socialising is a large part of shopping. 

For both those reasons, I don't believe high streets will die in the long run. 

But in the short run, there are going to be boarded up high streets while the landlords fight to retain their parasitic rent seeking model. ( And that does looked doomed, given online can avoid it). 

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Perhaps the landlords should offer a monthly subscription, £20k/month for the first five properties and your first month is free?

Thing is.. its all well and good be anti-landlord when it comes to commercial property... parasite(s) etc etc.

Sad fact is... vast majority are us!

Well indirectly through our pensions. Was historically seen as a safe cash flow - yes there are some REIT's which add another layer but odds on, that office you work at or the buisness park itself is managed by CBRE but owned by a pension fund.

If they get wiped out its not good overall... Check BT share price, its tanking as the deficit in the pension fund is expected to balloon.. and have to be funded by??? what would have gone to shareholders.. or more likely price hikes for services to everyone.

What a mess.

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