Following the November lockdown, the introduction of additional geographic Tiers in December which led into Lockdown 3.0, investors were rightly concerned for the prospects of the December quarter rent collection. However, across all sectors of our managed portfolio, our collection rates are up against previous quarters in the pandemic. The current quarter collection rates are shown below.

 

Rent Collection graph with incline

Service Charge Collection graph with incline

 

We have however seen a reduction in relative performance of both rent and service charge collection as the Quarter has progressed. We noticed good performance up to and at the due date, but we are now seeing the delayed effect of the lockdown on the receipt of future payments.

Offices and Industrial continue to perform better

The office sector has continued to be the strongest performing sector with an average of 83% of rent received by Day 21. Throughout 2020, the rent collection performance from the office sector has outperformed all other sectors. This is likely to be the case for the foreseeable future, as a result of the sector’s ability to operate remotely and be less affected by enforced lockdowns and restrictions. It is apparent that companies still see the benefit from operating out of an office, but will seek to use them differently as they become places where people are seeking to innovate through human connection.

The other area that has also performed well is the industrial sector, including distribution warehousing. Quarter on quarter we have seen an improvement in rent collection figures with 74% received by Day 21. The continued growth of e-commerce remains a key factor in the resilience of this sector.

Not all retail is the same

The retail and leisure market, unsurprisingly, has seen the biggest trading dip with the Tier 3 and Tier 4 restrictions having a major impact before the current lockdown. Nevertheless, rent collection for December at Quarter Day was at 60%, up against September by 18%. The better performance by due date was no doubt helped by the upturn in retail sales following the November lockdown with retail parks leading where footfall and trading has been better.

A weighting to essential retailers has seen both visitor numbers and retailer sales hold-up strongly as shoppers have shown a preference for out-of-town rather than covered shopping centres.  Payment plans agreed in previous lockdowns have helped keep rents coming in for retail park investors.  Whilst not being adhered to across the board, many are being honoured as sales in some sectors have continued strongly.

Overall, the December ¼ has not been as poor as expected, helped by the re-gearing of leases, rental concessions and monthly payments which have gone a long way to ensure the continued flow of income. Whether this will continue as we go deeper into lockdown it is difficult to predict.  For those in real estate the vaccine cannot arrive soon enough.