Apart from companies in the leisure and hospitality sector, along with the oil heavyweights, shares of commercial property companies were among the stock market’s worst performers last year.
Not all of them, of course: Segro, which develops, owns and manages warehouses across Europe, enjoyed a very solid year as demand for its space was supported by the rapid expansion of online shopping.
But those exposed to the retail, hotel and office sectors had a rotten 2020.
Land Securities, which manages the Bluewater shopping centre in Kent and which owns 30% of the site, saw its share price fall by 32%.
British Land, which owns the Meadowhall shopping centre in Sheffield and the Drakes Circus centre in Plymouth, tumbled out of the FTSE 100 after its shares fell by 24%.
Hammerson, owner of Brent Cross in North London and the Bullring in Birmingham, fared even worse with a stomach-churning 82% share price fall for the year.
Trading updates from the sector during the last 48 hours, reporting on the extent to which rents were paid during the crucial December quarter, suggest things are still very grim.
This quarter is known in the retail trade as the “golden quarter” as it is usually when most retailers make their money.
Making the December rent payment – which covers the first three months of the following year – is generally the easiest one of the year for retailers because their coffers are bulging with money from Christmas shoppers.
This year, following the national lockdown in November and the strict tiering rules that effectively replicated the lockdown in many parts of the country forcing many retailers and hospitality businesses to close, that was emphatically not the case.
On Monday, British Land reported that, for the December payment, it collected less than half the rent it was due from retail clients – some 46% – although office clients were in a better position, with some 96% paying up.
The company, which owns the Broadgate estate in the City of London and the Paddington Central development in west London, revealed it is also still owed money from some retail tenants for previous quarters – with just 49% of March rent collected, 73% of June rent collected and 72% of September rent collected.
Today brought updates from other players in the sector.
Land Securities reported that it had collected 65% of the £112m it was owed in December, with regional retail clients paying just 36% of what they owed, while retail, leisure and hospitality tenants in London paid just 29% of what they owed.
It also noted that, following insolvencies of companies such as Peacocks and some Company Voluntary Arrangements (CVAs) among clients, the total amount of rent due had fallen by £15m while discounts and deferred payments agreed with tenants brought the total down by a further £29m.
That took the total amount due down from £553m to £509m – and, of that, some £408m had been collected.
Things were somewhat better at Derwent London, which specialises in office space, including sites such as the White Collar factory in Old Street and the Tea Building in Shoreditch, both on the northern and eastern fringes of the City.
One of the most highly-regarded players in the sector, boasting a number of tenants in the tech industry, it said today that it had collected 83% of London rents including 87% of office rents due to it.
But the picture overall is of a sector that remains under intense pressure.
Adding to its woes is the government’s moratorium on evictions of businesses that fail to make their rental payments during the current COVID-19 crisis.
This had been due to finish at the end of September last year, was extended to the end of the year and then, last month, was extended to the end of March this year.
Commercial landlords have argued that the moratorium has been abused by profitable companies that could afford to pay their rents but have been deliberately not doing so.
John Cahill, analyst at stockbroker Stifel, said of the Land Securities update today: “None of this will come as a surprise to the market, given the difficult trading environment for its non-office tenants and the moratorium on evictions across the UK.”
Even before COVID-19, shares of the likes of British Land and Land Securities were struggling to convince investors that retail was only one part of their business, putting their shares under pressure.
But Mr Cahill said he expected to see gradual improvement in rent collection rates over the coming few months, and assuming a successful vaccination programme, he said collection rates ought to increase “significantly” in the summer months.
He added: “Either way, Land Securities has sufficient liquidity to navigate through this difficult period with no real pressure brought to bear on its balance sheet.”
Others may be less well-equipped to grind their way through the next few months and in the meantime, those commercial property companies with significant exposure to the retail sector will continue to worry about the risk of more collapses or CVAs, as will those exposed to the leisure and hospitality sectors.
As the anniversary of the first national lockdown looms, some owners of commercial properties will face with it the anniversary of their being unable to collect all of the rents owed on those properties.
Many of these companies now risk breaking borrowing agreements with their banks.
So the latter, too, will be facing calls to show forbearance and patience just as the property owners have themselves.