While the Coronavirus Act 2020, worked to protect business tenancies across the region, there was one sector that it didn’t protect, our landlords. Following the embedding of the Commercial Rent (Coronavirus Act 2022) earlier this year, we caught up with Laura Walker, Head of Property Management at Bradley Hall to discuss if the act is enough to support the North East’s landlords and the commercial property market moving forward.
Do you feel there could have been more protection for commercial landlords during the pandemic?
Yes of course, especially with national tenants and those tenants that continued to trade during the pandemic and had cash reserves to be able to meet their lease obligations. Where businesses were closed and legitimately required financial assistance, it allowed them to keep afloat during a particularly difficult period. During this time Landlords didn’t have protection and were left chasing debt and having to make agreements with their lenders to satisfy mortgages where rent funds were lacking.
How do you feel this has impacted the commercial property market in the North East?
I think in the beginning there was concern around when this would end. On several occasions, the end date for moratorium (the ban on forfeiture) continued to be pushed back. Now that the moratorium has ended I think businesses that have not survived the pandemic will end up vacating premises which in turn will be re-let. Some tenants have started to request covid relief in new leases should another similar pandemic style event occur in future, to protect their business position. In my experience, the ones that have been agreed have also been capped by landlords to ensure it doesn’t negatively impact their investment value long-term.
In terms of rent-payments, where does Bradley Hall stand? How have you handled coming out of the Coronavirus Act with tenants?
As managing agents, we actually performed really well during the pandemic and had really high percentages of rent collection throughout which was 16.7% higher than the national average in the first three months of the pandemic. We dealt with each landlord and tenant on a case by case basis and tailored payment plans to suit. The tenants we deal with are aware that moratorium has ended and we are now in a position where we are getting tenants back onto their normal payment frequencies. During the pandemic a lot of our landlords’ agreed to monthly rent payments instead of quarterly to assist with cash flow, but we are slowly returning to the ‘normal’ that we once knew.
Is the Commercial Rent (Coronavirus Act 2022) enough to support landlords going forward?
I think it will help landlords recover ongoing rent arrears and give landlords a regained trust in order to be able to collect their rents. It will also allow tenants to ring fence debts from when businesses were closed so will give them further time to clear those balances where it will cause genuine hardship to pay in one go but ultimately these amounts need to be paid back to landlords, some of whom have suffered themselves due to poor cash flow.
Do you feel positive about the North East commercial property market going forward? Do you predict any changes in demand?
I’d really like to see office demand returning, especially in the city centre. The buzz is starting to come back, but there are still a lot of people working from home. With the changes to Pilgrim Street afoot, this will return in the future, but the effects from the pandemic are still not over.
The recent article in The Times regarding council auctions for empty business properties is an interesting one. I am not sure it has been thought through to take into account capital expenditure for fit out costs, rent free incentives and that often one of the biggest costs for new startups and tenants is the cost of business rates – something that is mostly outside of a landlord’s control. There needs to be more thought surrounding the tenants covenant and how this could affect a landlord’s investment value, and the control a landlord has over the way the property is used and treated. This could be one way to see empty properties being utilised, but it needs to be in a landlord’s best interests too.
To learn more about Bradley Hall and the company’s commercial listings, click here: https://www.bradleyhall.co.uk