Leading commercial property agency makes prediction, claiming that social distancing, lower footfall, bankruptcies and online competition will make lower rents inevitable as retail and leisure margins shrivel.
Retail rents could reduce by up to 50% in some areas following the Coronavirus pandemic, a leading firm of surveyors has warned.
Adam Diamant, who runs London commercial estate agency and surveying firm Land Commercial Sureyors, says the downturn in footfall and the continuing ban for many leisure and food businesses will be the final nail in the coffin for thousands of retailers, and that 2020 is shaping up to be a write-off for many landlords.
Diamant should know. Started by his father, his company is one of the fastest-growing commercial property management firms in London but is now caught between tenants looking to reduce costs and landlords who are not keen to grant waivers or holidays.
“Many of our more sensible landlords choose to opt for deferments which I think is the most pragmatic way out of this crisis,” he says.
Land Commercial’s portfolio includes about 30% retail, plus office and light industrial while the rest is block management of leasehold apartments.
“The past few weeks have been pretty horrendous as the requests to defer or waive rent began coming in via phone and email as soon as the lockdown was announced,” he says.
But while he has no beef with tenants who want to plan for the future, Diamant is less impressed by those who were due to pay their quarters’ rent on 24/25th March but who contacted his company as soon as the lockdown happened on the 20th to say they couldn’t afford their rent due to lockdown, which hand’t impacted the economy yet.
“There’s lots of genuine people, but there are others who are taking advantage of the situation.
“Corporates tend to be aggressive and tell us what they are doing and cleverly word it, saying they are taking a rent holiday.
“They are still negotiating, it’s just that they feel they have the power because of who they are and can dictate terms.
“But when you’ve got ‘pound shops’, for example, claiming they can’t pay the rent but which have customers queuing around the corner at their stores, it’s hard to fathom.”
Consequently, Diamant says some of his landlords are not being flexible, but, on the other hand, others are going the extra mile. This includes one who owns an arcade of 13 small shops who has given her tenants a two-month rent and service charge holiday.
“By overall I think many people under-estimate what a huge problem Coronavirus is going to be for the retail property sector,” he says.