26 May 2020
The Scottish Property Federation (SPF) has recently conducted a survey of commercial property owners and investors to collate their experiences during COVID-19.
The survey responses represent more than 1600 commercial tenancies in Scotland, generating a view of the impact COVID-19 has had on the commercial property sector.
Eighty-eight per cent of respondents to the survey identified as small and medium-sized enterprises (SME) with 68 per cent indicating their businesses undertook development and regeneration activities in Scotland.
The survey highlighted the grim financial outlook for the Scottish sector, with 52 per cent of respondents citing serious or terminal financial challenges as a result of coronavirus-related rental income losses. Of the 25 respondents, only one was able to access grant support and one other respondent was granted the three-month empty property rates relief.
It has been suggested by some tenants that landlords seek support from their insurers. However, all of those who responded to the SPF survey on this question stated that there was no insurance support for commercial property owners impacted financially by coronavirus-related issues.
The survey responses also highlight a willingness on the part of property owners to work with their tenants, with all respondents indicating that they had agreed or offered some form of new arrangement to support their tenants during the coronavirus crisis.
Fifty-six per cent of respondents said they have tenants who could pay rent but are choosing not to do so since additional protections from eviction for non-payment of rent were introduced under the Coronavirus Acts in the UK and Scotland. Seventy-six per cent of respondents also said they had tenants imposing terms without discussion with their landlord.
Respondents reported that multinational business tenants were the least likely to work with their landlords, while SME tenants were more willing to work together to agree terms.
In response to the survey results, Robin Blacklock SPF Chair and MD of Dowbrae Property Consultancy commented:
“This paints a clear picture that the majority of commercial property owners have sought to support tenants through the crisis with a pragmatic approach and flexible terms.
“However, their approach is not always being reciprocated, especially by larger businesses.
“The commercial property sector contributes some £4.8bn to the Scottish economy and is an economic catalyst for jobs and investment.
“Despite this contribution, the survey clearly shows there is little or no financial support for the sector, which is facing mounting cashflow issues with lack of income on one side, and continuing tax and finance costs on the other. There is clear and present market failure, yet little or no support available.
“There is a warning in the survey that the very people we need to see investment in our commercial and town centres are the ones with no cashflow and no support.
“As we look to rebuild our economy after COVID-19, there is a very real risk that our investment community will simply not be there.”