The document discusses the challenges facing commercial landlords in the current economic climate. It notes that many landlords have empty retail and office properties as tenants downsize or go out of business. This leaves landlords receiving no rent income but still liable for expensive business rates. Banks are also more stringent with commercial loans and reluctant to take on distressed property assets. As a result, many commercial landlords are struggling financially and facing pressure from creditors.

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Published on 24 November 2011by Tony Groom
Times are Tough for Commercial Landlords
Commercial landlords are coming under pressure from all sides in the current
economic climate.
The plight of those landlords in the retail sector has perhaps been the most widely
publicised as more and more empty shops appear on the High Streets where retailers
have either ceased trading or moved out of expensive and badly performing outlets.
The problem for landlords is the double pressure of receiving no rent for their empty
properties while still being liable for paying expensive business rates. With business
rates calculated at approximately 40% of estimated annual rental value the burden
on landlords can be considerable.
Recently Dixons, owner of Currys and PC World, revealed that it had agreed with
some of its landlords, to pay rent of just £1 a year in exchange for Dixons continuing
to pay the business rates. Dixons is not the only retailer with business rate only deals
with landlords.
Many commercial landlords are struggling as their tenants downsize, restructure or
go out of business altogether, leaving empty industrial and office units for whom new
tenants are hard to find. They still have to service their own loans as well as securing
their empty premises and paying rates.
Compounding the problem is the change in attitude among lenders towards
property companies. Property loans are generally provided by banks who are now
asking for much more equity and much better tenant covenants with evidence of a
secure income when considering new or renewal of commercial mortgages.
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2. Banks are already overloaded with vacant and distressed property assets. While they
are often reluctant to appoint Receivers to recover assets pledged as security for
loans, especially while interest on the loan is being serviced, it still reverts to the bank
when the borrower goes bust.
The confluence of pressure is leaving many commercial landlords completely boxed
in, often with empty premises on their hands, unable to service mortgage liabilities,
unable to pay business rates and increasingly dealing with creditor pressure such as
winding up petitions.
Another issue is the amount of commercial property on the market. There are a large
number of industrial estates suffering with ‘For Sale’ signs on empty as well as
occupied premises. And there are few potential tenants, with most of the interest
coming from firms that are downsizing.
A related issue is the number of businesses that cannot be sold because of an
existing lease obligation. Buyers often want to downsize and therefore are seeking to
renegotiate lease terms before purchasing the business.
There are formal and informal restructuring options that can be used to help
commercial landlords who are dealing with vacant and loss-making properties.
However, restructuring property portfolios is a complex process and every single
situation is different. Essentially this is a situation that requires the knowledge and skill
of an experienced restructuring adviser who will look at each component of the
assets and debts in the portfolio as a matrix, and find the right solution for each
component.
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3. Need Immediate Help – Call Tony Groom on 0844 8040 540
K2 Business Rescue
The Emergency Service for Business
Call Tony Groom on 0844 8040 540