Positive survey: commercial tenants twice as optimistic as landlords on economic outlook and rents

18/09/2020

Optimistic commercial tenants are realistic the future could be uncertain; both landlords and tenants feel comfortable talking about rent concerns

A confidence index for the commercial property market has revealed tenants are significantly more optimistic about the economic outlook and rents than landlords.   The survey, run by Wild Property Consultancy, created a Commercial Property Confidence Index (CPCI) which revealed a confidence index score of 3.16 out of 5.   This was despite the survey being completed at the same time many tenants would have been required to settle their next three months’ rent in advance.

The survey took place during June and July with 116 responses from landlords, investors, advisors and businesses both large and small.   Whilst mainly focused on Oxfordshire responses included submissions from the Midlands and South East.

Neil Wild, Owner and Director of Wild Property Consultancy said: “Now more than ever it is important property professionals keep a finger on the pulse of changing consumer behaviour to help clients manage their investments. Our Index aims to track sector confidence locally and gain unique insight into how landlords and tenants are feeling, so as to identify strategies and solutions for commercial property”.

Respondents were asked a series of questions about their interest in the sector, how comfortable they felt about collecting, paying or discussing rent payments, their opinion on the outlook for the sector and the availability of suitable commercial properties in their area.

64% of all respondents said they felt uncertain about the economic outlook over the next six months. However tenants (58) are almost twice as optimistic about the economic outlook and their ability to meet immediate rent payments than landlords (40).

24% of tenants agreed or strongly agreed with the statement ‘I am feeling confident about the economic outlook for the next six months’, compared to just 13% of landlords. Plus, 60% of this Group answered favourably about being able to ‘comfortably pay rent right now’ compared to 35% of those responsible for collecting rent payments answering positively on the matter.

Mr Wild said, “This ‘confidence’ may be as a result of built financial reserves, Government aid or previous agreements with landlords about rent deferrals or alternatives payment methods”.

When the UK went into lockdown it only sought to intensify risks for town centres, commercial property landlords and businesses owners. The survey has revealed landlords and those responsible for collecting rents (58) do not expect their commercial income to be higher in the next six months.

Tenants also showed they are realistic that things could change. They were split in response to being asked about the possibility of having to discuss alternative ways to pay their rent in the next six months. However, landlords believe strongly (85%) that tenants will want to have these conversations in the immediate future.

Both parties feel comfortable to talk about any rent concerns that exist right now (69% of Landlords and 76% Tenants).

A large majority (65%) felt there is currently a lack of suitable property available to meet their needs right now.

Commercial property has traditionally been seen as a solid investment. But changing consumer behaviour and the coronavirus is causing landlords in certain markets to feel uneasy about the security of this income flow. 

Highlighting emerging commercial property trends, Mr Wild said: “The global pandemic is accelerating key trends shaping the future of retail. Businesses unable to adapt to the internet age are facing serious challenges. The way we occupy offices is also changing leading to calls for more flexible leases with less onerous commitments. Successful remote working may see businesses reduce reliance on large centralised offices. A shortage of industrial units for businesses has over recent years resulted in increases in rents. Lack of available freeholds for businesses wanting to own their premises continues to be an issue.”

However, Mr Wild believes strongly that commercial property remains a sound investment.   He said, “We have no idea how long the current situation is going to last, but one thing is for certain, businesses are going to tighten their belts to protect their livelihoods. Now more than ever landlords and investors of commercial premises need to be assessing changes in the market. Particularly changes in consumer behaviour and economic and structural changes.

“It is important to plan ahead for requirements, investing financially into the property to ensure it continues to be suitable long term for its use. Landlords are advised to arrange frequent discussions with tenants. Now is the time for open and honest conversations, to build resilience and restart right.”

To download your own copy of the report visit https://www.wild-property.co.uk/.

Listen again to our interview with Neil Wild here:


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