Can Tenants Pay The Rent? Omicron Surge Meant A Nervous Christmas For Property
The idiosyncrasies of the UK commercial leasing system mean that this year, tenants are due to pay their quarterly rent on Christmas Day. Whether those in the hospitality and retail sector are able to pay or not is another question entirely.
Through 2021, figures for the amount of rent collected by landlords have been steadily rising as the vaccine rollout allowed life to return to something like normal. But the rapid rise in infections created by the omicron variant has caused fresh pain for tenants and the landlords that lease property to them.
The UK government on Monday decided against introducing a lockdown or any other type of Covid-19 restrictions before Christmas Day. Data indicates consumer-facing businesses are already suffering from sharply reduced trade, with people staying home to avoid contracting Covid-19 and missing out on seeing family during the holidays.
UKHospitality estimated that revenue for the hospitality sector was 40% below what operators were anticipating last weekend. Hospitality companies typically make around a quarter of their annual revenue during the festive period.
Data from Springboard showed that UK retail footfall was 17% below 2019 levels last weekend as many shoppers avoided the high street on what is typically the busiest shopping weekend of the year.
The UK government has provided an emergency financial package of up to £1B to support businesses affected by the omicron surge. About two-thirds of that is earmarked for hospitality businesses, which can claim up to £6K of relief for each of their sites, with the remainder going to other types of business.
“This is a generous package building on existing hospitality support measures to provide an immediate emergency cash injection for those businesses who, through no fault of their own, have seen their most valuable trading period annihilated,” UKHospitality Chief Executive Kate Nicholls said in a statement.
But some operators were scathing about the support the measures would provide.
"The chancellor's announcement of £6,000 per site for businesses like ours is wholly and shockingly inadequate,” D&D Chief Executive Des Gunewardena told The Caterer. “Many of our larger restaurants in Central London — Quaglino’s, 100 Wardour Street, Coq d'Argent etc. — each lost £100,000+ in revenue from cancellations last week. And the same again this week. And heaven knows what's going to happen to our New Year's Eve. So, each of those businesses is facing a £200,000 loss and has been offered £6,000. Doesn't even cover the cost of our Xmas decorations.”
For landlords, the question is how this might filter through to a tenant’s ability to pay rent.
Data from Remit Consulting indicated 85% of tenants paid their rent in the first month after last quarter’s due date in September. That was up from 79% the previous quarter.
The new hit to businesses may see that figure slide back.
“While the emergence of the omicron variant of Covid-19 may not have a big impact on the figures for the last three months, the increased restrictions, particularly in the retail and leisure sectors, may affect the amount of rent collected when the December Quarter invoices are issued by landlords and property managers,” Remit Assistant Consultant Laura Andrews said.
Remit estimated that landlords are already owed £7.4B in unpaid rent.
