19 July 2021

Industry leaders believe pension funds will take a hit as a result of the continued extension of the moratorium on unpaid rent, which won’t support tenant recovery in the long term  

The decision by the UK government to extend the moratorium on commercial rents until March 2022, preventing landlords from pursuing tenants for unpaid rent, is having a stark and far-reaching impact on the real estate industry which is facing a shortfall an estimated £6 billion of unpaid commercial rent since 2020 in the UK alone.    

As part of a major industry-wide survey conducted by leading international law firm CMS which engaged over 200 business leaders and decision makers, respondents were asked what the consequences of the continued extension of the moratorium on unpaid rent would be.  The key findings revealed:

  • 60% of respondents said it would have a negative impact on pensions 
  • 67% of respondents said this would encourage more rent default
  • 70% of respondents said it will encourage corporate restructuring
  • 47% of respondents said it will result in less investment in property by landlords
  • Only 25% of respondents thought in the long term it would support tenant recovery 

Danielle Drummond-Brassington, Head of Real Estate Disputes, CMS, said:

“The announcement last month that the moratorium would be extended to March 2022 was a bitter blow to the industry, the extent to which we can see from the findings of this survey.  Landlords are now facing considerable financial pressure and it is the length of the moratorium extension which is particularly difficult to comprehend.  Although well-meaning, the government’s measures could have unintended consequences for pensions, rent defaults and corporate restructuring without benefiting tenant recovery in the longer-term.”

The findings form part of CMS’s annual real estate report, which acts as a barometer for the industry and an outlook for the market, while providing a deep dive into a key topic.  In its ninth year, this year’s report - “Real Estate Rebound -  A Tech-Accelerated Recovery” - examines the impact technology is having in shaping the future of the real estate industry, its response to ESG and its recovery from the pandemic.

In addition to gauging the latest perspective on the outlook for the real estate market from over 200 real estate industry leaders, occupiers and investors controlling assets in excess of £500bn, this year’s report focuses on Technology as the fundamental driver which is having a transformative effect throughout the real estate life cycle and the sector’s response to ESG.  The research homes in on four key sectors; Offices, Logistics, PRS and Life Sciences to understand how innovation and digitalisation is propelling these key areas of real estate forward. 

The quantitative survey which took place in April-May 2021 and was conducted by FTI Consulting on behalf of CMS, gauged and weighted the opinions of over 1,500 Office occupiers and 1,500 renters from across the UK, Europe and Asia.  Across the retail industry, the poll garnered the opinions of circa 600 decision makers, while in the Life Sciences community, opinions were taken on board from over 250 global sector specialists.