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Why financial strain may worsen for commercial landlords

A tsunami of corporate failures could be on the horizon. The number of businesses in significant financial distress jumped by almost 100,000 to 723,000 during the first quarter according to Begbies Traynor, the highest increase in seven years.  

The real estate sector has suffered the second highest jump in companies under severe financial pressure over the past year, according to figures from the insolvency specialist, with 51 per cent more businesses entering distress. More specifically, commercial landlords come in at number five on the list that covers 22 sectors, with a 46 per cent rise. For anyone that has taken heed of the dire rent collection levels reported by some of the UK real estate investment trusts (Reit) in the wake of the pandemic, this should be unsurprising. 

Cash-strapped retail and hospitality tenants, whose stores have been allowed open to trade for less than half of the past 12 months, have struggled to make rent payments. The retail sector suffered the highest shortfall in rent collection for the second quarter, with only 52 per cent of the amount owed paid, according to property management platform Re-Leased. That was the worst quarterly figure since the lockdown measures were first imposed last year. The moratorium on evictions for non-payment of rent, which is due to expire on 30 June, has emboldened some to withhold rent, some landlords have argued. 

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