With a new variant on the loose and infection rates growing once again, it’s safe to say that we are not ‘out of the woods’ yet when it comes to Covid-19. The start of the pandemic nearly two years ago has seen the nation and the wider world impacted on a scale that we haven’t seen during our lifetimes.
The Covid-19 pandemic has affected both our professional and personal lives, and the commercial property sector in particular has seen enhanced challenges and complications as a result. Landlords and tenants alike have seen a shift, with commercial property owners and tenants in the retail and hospitality industries bearing the brunt of these difficulties.
As a leading commercial estate agency assisting landlords, tenants and investors throughout Staffordshire, Cheshire and Shropshire, we witnessed first-hand the struggles of the commercial property sector.Â
Here we take a closer look at the impact of Covid-19 for the clients and wider sector our commercial estate agents serve, and look ahead to what’s in store for the industry as we continue our fight against Covid-19.
Organisations are downsizing their commercial spaces
The Covid-19 pandemic solidified the demise of the high street. As companies delivering all non-essential products and services couldn’t operate from their bricks and mortar stores due to lockdown restrictions, they moved online to serve their consumer bases digitally.Â
Despite lockdown restrictions easing and the ‘stay at home’ rule officially ending back in March, our commercial estate agency noted that the vast majority of businesses have continued to maximise their online operations and as a result, scale back their physical presences.Â
A survey, detailed here in the Property Reporter, unveiled the true impact of changing consumer behaviour and the role of traditional stores. It stated that half of the UK’s business leaders found that the need for commercial working spaces had changed due to Covid-19. More of those surveyed believed that lockdown-enforced remote working would become a permanent thing for companies.Â
The research went on to unveil that 73% of the decision makers surveyed would be looking to downsize their commercial premises in the coming year, and this is a trend our commercial estate agents have witnessed.
Uncertainty is causing diminishing rental values
The market uncertainty businesses looking to recover post-lockdown are currently facing is causing a ripple effect throughout the commercial property market.Â
Rental values are shrinking, with the indecision surrounding government restrictions making it more challenging than ever for commercial estate agents all over the country to deliver accurate valuations.Â
The lockdowns also caused a wave of defaulting tenants within the commercial property sector, which has negatively impacted commercial property values.
The Chartered Surveyors who conduct private valuations at our commercial estate agency use RICS Valuation Standards – i.e. the ‘Red Book’ – to offer a complete view of the market and accurate commercial property values even as the world continues to face uncertainty.
Defaulting tenants left landlords in difficult situations
Whilst government backed schemes like rate rebate, Coronavirus Job Retention Scheme, Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) were introduced to support tenants during this difficult time, the same help was not extended to landlords.
Many landlords were left in difficult situations, with defaulting tenants leaving these property owners at the mercy of covenant breaches. Failure to keep up with loan repayments meant that the balance sheets of affected landlords were negatively impacted.Â
During this period, our experienced commercial estate agents recommended working with the banks to maintain open communication about your and your tenants’ situations. Thanks to government pressure, banks were able to offer waivers and adjust loan arrangements to better serve struggling landlords.
The future of the commercial property sector is looking brighter
Despite the Covid-19 pandemic being far from over, the economic recovery we are currently experiencing is presenting a way forward for the landlords and tenants our commercial estate agency works with.Â
The role of commercial property is being re-envisioned, with offices and other commercial spaces being better served by extended permitted development rights and able to be remodelled for the future. With the UK’s housing crisis still very much an issue, commercial property could provide the space needed to transform the wider property market. This increased flexibility is already being seen in the portfolios of landlords, who have been able to actively diversify for the first time.
The pandemic has also opened up conversations between landlords, tenants and the commercial estate agents representing them to provide better clarity and a mutually beneficial way of collaborating.
For further insights into the state of the commercial property market or to find out more about how our commercial estate agency can assist you with our commercial services, please get in touch with our commercial estate agents today.
