It has been a tough year for the commercial property sector, but new data has revealed some positive signs of recovery based on a key indicator.
According to data from commercial property software management company Re-Leased, the number of commercial tenants paying their rent on time continues to trend upward and reached a four-month high in July.
Last month, 85% of commercial tenants were able to give lease payments within 30 days, increasing from 80% in June and 63% in April at the height of business shutdowns due to the coronavirus pandemic.
While the increase in July is a good indication of that the commercial property sector is recovering, it is still below the pre-COVID-19 average of 90%.
Industrial tenants were best at shrugging off the pandemic’s impact, with 88% paying their leases on time. Office occupiers came next at 87% followed by retail renters at 84%. The last was the category most-affected by COVID-19’s economic disruption, with less than half or 46% able to pay their rents on time in April.
In terms of regions, Wellington and Canterbury have returned to pre-coronavirus levels in rental payments at 93% and 90%, respectively. Waikato exceeded its pre-pandemic average of 93%, with 96% of tenants paying on time. In contrast, collection rates at Northland (70%), and Otago and Southland (78%) were the lowest in July and remained well-below the 90% and 95% average before COVID-19 struck.
Reflecting the improvement in rental payments, landlords discounted less rent in the form of credit notes in July at 2.5% compared to 7.4% in June. The number is still above pre-COVID-19 levels of 1.6%.
However, average commercial lease lengths fell 6.6% to 34 months in July from June. The drop was felt across all categories with office lease duration sliding 7.8% to 26 months, retail leases decreasing 7.7% to 48 months, and industrial tenancy down 3.6% to 40 months.
Re-Leased used its new online data collection platform Commercial Real Estate Data Intelligence & Analytics (CREDIA) to come up with the numbers. The tool combines more than 15 metrics on occupier performance and leasing trends to present an industry-wide view of how commercial leases are performing over time.
CREDIA also utilises anonymised and aggregated data directly from over 10,000 commercial leases in New Zealand managed on Re-Leased’s cloud-based commercial property management platform.