Commercial lease restructuring firm Cedar Dean surveyed more than 230 businesses in the trade and also found 86% of London-based operators don’t think their new or existing terms are sufficient, compared to three quarters (77%) of those outside the capital.
The study revealed just over a third (38%) of respondents have agreed new terms with the majority of their landlords.
Complete reset needed
Cedar Dean CEO David Abramson said: “The results of our survey clearly show that the commercial property market needs a complete reset. This obviously isn’t business as usual. Many landlords still need to get their heads out of the sand and recognise Covid-19 has changed the game for the long term. This isn’t a six to 12-month issue.
“We’re seeing more company voluntary arrangements (CVAs), many of them unnecessary, because there is currently no mechanism for commercial rents to be revised down in the rent review process.
“However, this is not a quick fix. In the meantime, with over 80% of the sector still needing better terms, landlords and tenants must work together towards win-win agreements so that both parties can survive the current crisis.”
Central London-based Adventure Bar director and co-founder Tom Kidd said he didn’t think the magnitude of the fallout still to come had been appreciated.
Financial time bomb
Kidd added: “Up to 80% of the hospitality sector is locked in a Mexican standoff when it comes to rent re-negotiations. If the commercial eviction ban does end on 31 December, as much as 70% of the industry could be out of business early next year.”
"Companies are using CVAs to force landlords’ hands. But that's not good for the taxpayer – whether it’s written taxes or write-downs on pension funds, the general public don’t do well either way.
"The Government could look at reform to the law around frustrated lease, and there is a strong case for mutual break clauses, giving both operators and landlords the option of terminating agreements that didn’t work for both parties without bringing down the whole company. We are facing a financial time bomb, so why not look at every avenue?"