Commercial property overview – Covid-19

04 Jun 20

Sadly, our Property Conference scheduled for the 22nd April was postponed due to the escalating crisis.  As the lockdown begins to ease, we look at the impact this pandemic has had on the commercial property sector in our region.

Rent Collection & Arrears

The lockdown was announced only a few days prior to the March 24th quarter date where most tenants should have been prepared and ready to transfer their rent payments on the due date.

The availability of relatively unqualified Covid grants of £10,000 or £25,000 depending upon a property’s R.V. will have assisted businesses greatly in meeting their March rent commitments.  However, the inability to trade due to the lockdown during April and May provides greater justification for difficulties within the June quarter.

A high proportion of the March quarters rent default, which we have experienced on behalf of clients, has been opportunistic and difficult to justify.  The June quarter will be a greater challenge and those tenants who met their March commitments will be best placed to engage constructively with their landlords.

Additional difficulties will arise with regard to break clauses where tenants wish to leave premises, the majority of break clauses require there to be no rent arrears in order to be effective, and this will be an additional challenge for those tenants who have defaulted on their rent.

Cashflow difficulties are widespread and we anticipate an acceleration in the move to monthly payments and would encourage landlords to co-operate in this respect.

Agency Sales & Lettings

Our commercial agency teams have remained active throughout the crisis and over the past 8 weeks our Colchester agency teams have written 17 new commercial property transactions, including a freehold ¾ of an acre industrial site to be sold unconditionally, a 3,600 sq ft leasehold office and 4 industrial units within the CO postcode.  The office letting reflected a headline £16.66 per sq ft based upon a 5-year term certain lease.

The rental and capital values we have agreed support pre-Covid levels and demand in the industrial and office sectors have been surprisingly good.

During lockdown, Fenn Wright completed the letting of Unit G, Eastways, comprising 13,876 sq ft of refurbished warehouse accommodation with direct access to the A12.  The unit was let to a multinational technological distribution company on behalf of a fund and on confidential terms.  Rent achieved was at a pre-Covid level.


Auction results also provide vital guidance and help us to gauge market sentiment and current values.  Fenn Wright acted as Joint Auctioneers on the 27th May 2020 in connection with a 4,800 sq ft, B2/B8   industrial property in Clacton, this sold at auction for £78 per sq ft, which is in line with pre-Covid levels of value.


Last week, my colleagues in our Ipswich office exchanged and completed the sale of this 37,000 sq ft warehouse at Eye, Suffolk.  Located 15 miles north of the A14, a price in excess of £50 per sq ft was achieved.  Another transaction at pre-Covid levels of value.

If you have commercial premises to lease or sell, please contact our Agency teams in South Essex – 01245 261226  l  North Essex – 01206 854545  l  Suffolk – 01473 232701

Red Book Valuations for Loan Security or Financial Accounting

We have continued to provide formal valuation advice throughout the crisis.  With transactional volumes reduced and in some sectors non-existent it is a matter of conjecture as to how values will react as ‘lockdown’ is released.

Our expectation is that we will see a material decline in capital and rental values in the High Street retail sector, together with an increase in the supply of vacant premises.

Affordable lot size premises for employment use look less vulnerable, the market fundamentals for this sector having been rather better as we moved into lockdown.  Larger lot sizes and very specialist premises are likely to be problematic and experience heightened volatility.

It will take a further 6–10 weeks before clear transaction based evidence becomes available to substantiate post-COVID valuation adjustments and in the meantime, in line with RICS guidance, we will be caveating our valuation reports with the RICS recommended ‘Material Valuation Uncertainty’ clause.

For a copy of the RICS recommendation, or to discuss your valuation requires please contact either Hayman Wheaton FRICS or John Birchall MRICS.

Offices & Homeworking

With 8 million people working from home during the lockdown, there is no doubt that working practices are set to change permanently.  Daily enquiries are being received from office occupiers contemplating downsizing, this is not necessarily problematic for landlords within the CO postcode, the churn in occupiers which it will generate will be beneficial; it will be the Cities where travelling on public transport and occupation of high rise buildings are a necessity which will be most adversely affected.

Factors which will moderate the pace of local change include:

  • Poor quality internet connections and technology constraints in the rural communities around North Essex and Suffolk will limit fully efficient homeworking.
  • The efficiencies and synergy of teams needs to be maintained even if on a rotation basis, and in many professions and specialisms mentoring and the direct supervision of junior staff remains an important part of the learning process and career progression.
  • Office costs are a relatively low overhead, typically property costs as a proportion of total costs is under 10%, cost savings are often over estimated and can reflect a false economy if businesses cannot attract and retain the best employees for whom a high quality working environment is a key consideration.
  • In the short-term, fears of infection from hotdesking are very apparent and whilst this will reduce, it will limit the ability of some businesses to downsize.

Fenn Wright – Reopening Offices

Our Commercial, Development, Residential, Water & Leisure and Farm & Estates teams have all been working remotely throughout the crisis.  I am pleased to report a gradual increase in personnel within all of our offices and also that levels of activity across all property sectors are improving.

Above all, we offer very best wishes and good health to all of our clients and contacts and very much hope that we will be able to reschedule the Property Conference in late 2020.

Best wishes to you all,

Lewis Chambers FRICS

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