“Landlords are incredibly concerned about their prospects of collecting rent on the June quarter day, by which time the majority of retailers will have been closed for three months.”

In our latest new reality video Scott Marriott, Director in Restructuring, KPMG in the UK, discusses the effect that COVID-19 has had on the real estate sector.

“The biggest challenge facing most businesses now is how they occupy property going forward if social distancing restrictions remain in place for an extended period.”

Some of the main concerns for businesses renting real estate are:

• If businesses cannot fully open, will they be able to trade profitably and if not, what impact will this have on the rent and service charge they pay?
• How will occupiers of multi-let office buildings access common parts including lifts, stairwells, kitchens, toilets etc – who manages, pays for and polices the tenant’s actions?
• What impact do the lockdown and social distancing measures have on supply chains and how will logistics companies adapt to meet these?

The latest MSCI indices reported that all commercial real estate sectors had seen a reduction in capital value in the last few months. The magnitude of these monthly falls in value are rare and unprecedented outside of major events such as the global financial crisis and the Brexit referendum.  

This puts incredible pressure on companies who are heavily leveraged and could result in them breaching loan covenants. With so many sectors now likely to go through significant structural changes, the path to recovery is unclear and likely to take time.

Discover more insights on the way that COVID-19 has affected the real estate sector.