Landlords and tenants must communicate in order to resolve the cash flow problems caused by national lockdowns and persistently low footfall, says Partner in Birketts’ Commercial Property Team, Stuart Raven.
The call for both parties to work together comes after the British Retail Consortium estimated footfall to be 73.5% lower in February 2021 than February 2020. Despite this huge decline due to the closure of non-essential retail, it is a 3.4% increase on January 2021 footfall.
The cost to retailers of the UK’s three lockdowns is estimated to be more than £22bn, and while BRC Chief Executive Helen Dickenson OBE welcomes the extension of several business funding schemes, difficult times are expected for the high street until its planned reopening on April 12 at the very least. While the current rent moratorium supports high street businesses unable to trade during lockdown, commercial landlords could be left without any income until the moratorium ends, with no guaranteed income afterwards.
In the face of huge changes since March 2020, Stuart said tenant and landlord relationships have benefitted from collaboration and mutual agreements during the pandemic, with rent suspensions and revisionary leases working in the short term. The long term-picture is less clear, with businesses in sectors most drastically affected are now routinely seeking these sorts of rent concessions, but different solutions may be found in 2021.
Stuart said: “The pandemic has hit so many business, especially those in the retail and leisure sectors … when lockdowns were imposed incomes disappeared overnight – but overheads such as rent didn’t and when those quarter days roll around ready cash is absolutely vital.
Inevitably therefore, the plight of commercial tenants has been at the forefront of people’s minds and the government has acted – to protect jobs and incomes – with a raft of measures, the most notable of which has been the moratorium imposed on forfeiture action.
However, I think the bigger question is whether any of these options actually represents a genuine way forward in the current circumstances. Our experience over the last few months is that most landlords are looking to the future, playing a longer game and working really hard to sustain good landlord and tenant relations.
In practice, we’ve seen real collaboration and common sense – mutually agreed arrangements for rent suspensions, rent suspensions with reversionary leases and even rent holidays. Looking ahead, what has, so far, arisen by way of hastily conceived, concessionary arrangements is quickly finding its way into new lease negotiations. Numerous tenants (especially those in the sectors most affected by the lockdowns) are routinely seeking to enshrine rental concessions into the standard commercial lease, and who can blame them? But, whether this becomes another “new normal” remains to be seen.”
To learn more about the issues being face by commercial landlords in Suffolk and what solutions may be available, you can listen to Stuart alongside Fenn Wright’s Consultant Surveyor, Mark Sargeantson, and BDO’s Tax Partner Peter Harrup, in Birketts’ annual property webinar.
If you would like to learn more about how Birketts can help you with your property matters, please contact our Commercial Property Team.
Birketts’ upcoming webinars can be found on our Events pages.