With the after-shock effects of the global pandemic it is crucial that investors consider carefully the ability of tenants to pay the fixed income rent. This is particularly relevant in certain sectors where landlords are facing operating risks and increased costs which they are unable to pass on to their customers.
The question to ask is how the risk is rated analysed and monitored. Historic records may now prove to be unreliable and an understanding of the sector and the success or otherwise of a potential or existing business is crucial to advising investors.
We have observed a substantial increase in demand in the Industrial Sectors and Secondary Retail still seems to be popular although the identity of the tenants and the mix of occupiers is changing with the High Street, in our opinion becoming a destination centre for leisure activities.
As retail customers Continue to expand their online purchases it is likely that Prime Retail units will be more adversely affected although once again it is expected in the long term that new uses for come to the fore. The question remains will the Tenants be prepared to pay a fixed rent or request a rent based on profit or turnover and will those investors (primarily Pension Funds but now also including Local Councils) be willing to accept and adapt to those changes?
