“Today’s quarterly rent date for commercial properties in England is likely to be like no other, with COVID-19 impacting all businesses extremely hard and real estate businesses far from immune.
“Many landlords have been working proactively with their customers, in some cases already announcing rent moratoriums or holidays, especially for hardest hit sectors like retail, leisure and hospitality. Investors in such property are likely to receive little if any rent based on the mood music to date, or indeed following the government’s recent ‘lock down’.
“On so many levels it’s quite understandable, hence the industry’s sympathetic ear and level of support. The immediate focus is very much on seeing customers and occupants through this time of crisis, with the health of society at large placed front and centre, but that’s not to say there aren’t going to be ramifications further down the line.
“If rental payments are to be missed, property companies will be under increased pressure to pay interest on their own loans and they may even default. This will impact those invested in commercial property, some of whom may depend upon the regular income it provides. Far from just private or family wealth, these investors include those in receipt of pensions and savings, shareholders in REITS or beneficiaries of company and state pension schemes.
“The ramifications could even stretch beyond the near-term, prompting a fundamental rethink on how corporate real estate spaces are invested in as well as used in the coming years, but only time will tell on that front.
“For many property players, it may feel like there’s little that can be done but ride this crisis out, however the key to remaining on top of the situation will entail: having an open dialogue with customers; regularly monitoring rental income and cash flow; assessing the impact of this on bank covenants or issues arising from restricted cash, and liaising with lenders early, outlining your issues and the plans you have to mitigate them.”
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About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 17,600 partners and staff. The UK firm recorded a revenue of £2.40 billion in the year ended 30 September 2019. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.