- Nearly two-thirds of commercial property tenants who are in arrears have not paid some or all their rent for more than two months.
- Over a tenth are more than six months in arrears.
- Since the start of the coronavirus pandemic and related lockdowns, about 442 businesses had entered business rescue.
Nearly two-thirds of commercial property tenants who are in arrears have not paid some or all their rent for more than two months – and some are more than six months are in arrears, according to a new report.
The Commercial Property Rental Monitor for the first quarter of 2021, issued by credit bureau TPN, was released this week. It found that commercial property tenants who are more than two months in arrears had increased from 54.5% to 63.6%.
Of particular concern, it said, was that 13.5% of delinquent tenants are now more than six months in arrears. Delinquent tenants include those who made partial rental payments or no rental payments at all.
About 26.4% of tenants are less than a month in arrears.
The biggest stressors, TPN said, were the ongoing Covid-19 pandemic and electricity constraints hampering the ability of the commercial property sector to recover – given the impact on productivity.
The report said since the start of the coronavirus pandemic and related lockdowns, about 442 businesses had entered business rescue.
Rent is then often renegotiated, adding additional pressure on the owners of commercial real estate.
Furthermore, there have been 2 275 businesses liquidations since the hard lockdown in April 2020.
The report warns that more such liquidations can be expected in coming months.
Who is worst affected?
Commercial tenants in the smaller space category below R10 000 per month are the most stressed, with 60.73% in good standing.
Those paying between R10 000 and R25 000, and between R25 000 and R50 000 per month are faring marginally better at 63.44% and 63.77% respectively.
Of those paying more than R50 000 per month, 64.64% are in good standing.
Retail tenants have experienced the biggest recovery in the commercial real estate sector. In May 2020 just 40% of retail tenants were in good standing. However, by the first quarter of 2021, 61% of retail tenants were in good standing.
The latest report shows 66% of industrial tenants and 69% of office tenants are in good standing.
Pre-pandemic, 77.85% of tenants were in good standing in the first quarter of last year.
According to Michelle Dickens, CEO of TPN, who compiled the report, no quick fix should be expected for SA's commercial real estate sector, because it relies heavily on business recovery.
"Constraints to business productivity, including the continued work from home trend, has had a significant impact on the sector," she said.
FNB's Commercial Property Broker Survey for the second quarter of 2021 also indicates high levels of financial pressure in the sector. Focusing on the key drivers of movement and sales activity in owner-serviced properties, the survey results show financial pressure to still be by far the biggest single driver.
By far the highest percentage of owner-occupiers (55.37%) are still perceived to be selling or relocating influenced by financial pressures. Relocating to be better positioned relative to the market appears to be less of a priority at present.
According to the FNB report, the weak economy is causing more owners to stay put for the time being.