Landsec, one of the UK’s largest property companies, has warned that it does not expect the economy to recover to levels seen before the coronavirus pandemic until 2022 at the earliest, as it announced a near 10 per cent hit to the value of its portfolio.
The total value of the company’s estate, which includes Deutsche Bank’s new London headquarters 21 Moorfields, fell 8.8 per cent, or £1.18bn, to £12.8bn over the year.
“While it is too early to predict outcomes with any certainty, it seems prudent to plan for more business failures and higher vacancy rates across our portfolio, in particular leisure and retail, and we don’t expect to see the economy recover to pre-Covid-19 levels before 2022 at the earliest,” the company said.
In the short-term, the virus has hit the company’s rent-take hard. With much of its portfolio of offices and shops shut as a result of the pandemic, Landsec had received just 63 per cent of its rent 10 days after it was due on March 25, compared with 94 per cent at the same point a year ago.
“June rent collection rates are likely to be worse than March given that most of the negative economic impact from Covid-19 has fallen in the second quarter,” said Landsec.
Across the UK, landlords are anticipating that the rent-take from retailers, which have been protected from eviction by the government, could be under 10 per cent in June. Retail makes up about a third of Landsec’s portfolio.
Landsec has already launched an £80m relief fund for struggling businesses on its estate.
Only 10 per cent of the company’s office space is currently in use, and if it remains unoccupied by the next rent payment date on June 24, rents from office occupiers might also be affected. In its most severe downside scenario, the company estimates rent receipts from retailers could fall by 75 per cent in the next 12 months, and 20 per cent from office tenants.
As well as coronavirus, the valuation of Landsec’s estate was hit by a decline in the value of retail space, which was due to shifts in industry rather than the recent economic ructions, according to the company.
Landsec’s retail portfolio lost more than 20 per cent of its value over the year, with regional shops and retail parks faring particularly badly.
The virus, which has closed the vast majority of stores and forced shoppers online, is widely anticipated to accelerate the decline of high street retail and shopping centres.
Shares in Landsec have fallen 36 per cent to £6.32 from a mid-February peak, before the UK government imposed lockdown measures.