Since the COVID-19 pandemic began, getting data and insights into the changing trends across the Commercial Real Estate Industry has become more important than ever. Performance can be difficult to quantify with a distinct lack of consistent measures across the industry.
Over this period, we have been delighted to provide regular insights to the industry through CREDIA Index, the Commercial Real Estate Index. This month we have seen some positive signs of recovery across the United Kingdom, New Zealand and Australian markets.
CREDIA Number for Rent Collection increased for all asset classes
Across the United Kingdom, New Zealand and Australia the CREDIA Number for Rent Collection has increased for all asset classes. This indicates that rent collection has continued its improvement, with landlords collecting more rent, faster after the due date. The number is almost back to pre-COVID levels, showcasing greater occupier resilience.
The United Kingdom has seen an increase of over 10% across all asset classes. Retail looks to be recovering particularly well across all the markets with increases in the CREDIA Magic Number for Rent Collection of over 14% across the United Kingdom, Australia and New Zealand.
Understanding the metric: Our CREDIA Magic Number for rent collection assesses performance across the rent collection cycle (7, 14 and 21 days) and applies a scaling multiplier to generate a number from 1 to 10. A lower score indicates poor rental collection efficiency, while a high score indicates successful debtor management.
Level of Landlord Subsidies decreased or remains flat across the board
As landlords look to restore their cash flow from before the pandemic, a flattening or a decrease of Landlord Subsidies demonstrates that the need for occupier assistance may be waning.
In the United Kingdom, Landlord Subsidies have remained flat from July to August, and in Australia and New Zealand they have continued to decrease across the board.
In New Zealand, the level of rent assistance provided by landlords has decreased an average of 2.5% from July to August, which is closer aligned to the trend we have seen globally.
Stabilising occupier landscape
Across the United Kingdom, Australia and New Zealand, there are positive signals of a more stabilised occupier landscape.
In the United Kingdom, WALT has either held firm or increased across most asset classes. This shows a growing willingness to renew leases and provide greater confidence of sustained cash flows for landlords. This is a good indication that portfolio valuations are recovering, as the average covenant to which they are underpinned has, for the most part, risen since last month.
In Australia, occupancy rates have remained consistent, with less than 1% variance from the prior month. Significant spikes in vacancy rates can portray uncertainty for landlords, acting as a gauge for wider market sentiment. Landlords should be buoyed by the fact that there has been an avoidance of further void units in their portfolios.
In New Zealand, the potential bad debt indicator has remained consistent with less than 1% variance from prior month. Landlords can take comfort in the fact that Overdue Rent figures across asset classes have seen little change. Additionally, the debtors are still in occupation across present arrears, signifying a greater chance of recovering.
