Colliers Canada reveals that 16 per cent of Canadian commercial tenants paid no rent in May 2020 as rent collection continues to decrease during the COVID-19 pandemic.

The Rent Collection and Relief Status report resurveyed 7,100 tenants across Canada in May as a follow-up to an April survey.

The company’s latest report shows:

• 39 per cent of tenants who asked for rent relief in April did not make any payments for May, while 19 per cent provided partial payments and 42 per cent made full payments.
• 21 per cent of retail, industrial and office tenants requested rent relief amid the ongoing financial impact of the COVID-19 pandemic.
• Rent collection deteriorated by 1 per cent in March, 10 per cent in April and 13 per cent in May from February’s baseline.

A further decline in June’s rent collections is anticipated before improving in July and August, assuming the reopening of businesses continues.

Colliers anticipates a lag of six weeks between reopening dates and an uptick in collections due to businesses and consumers taking time to assess the situation as conditions start to return to normal.

“There are several factors contributing to the decline in rent payments from April to May,” says John Duda, president of Real Estate Management Services at Colliers Canada. “These include overall deterioration of conditions that many businesses are facing due to closures or decreasing demand, and the fact that some tenants and owners have been in a holding pattern regarding rent payments and deferral discussions while learning more about the Canada Emergency Commercial Rent Assistance (CECRA) program, which recently opened for applications.”

The May report also examined the duration of rent relief requests, and revealed these additional findings:

• Of the tenants who requested rent relief, 23 per cent were able to negotiate direct relief agreements with their landlords outside of CECRA. Of that number, 94 per cebt were granted deferrals and 6 per cent were granted rent abatements.
• The most common relief duration is three months, with 46 per cent of tenants being granted this length of relief, 28 per cent granted two months of relief and 18 per cent granted one month of relief.
• Retail tenants are most likely to have come to an agreement on rent deferrals (18 per cent), followed by industrial tenants (14 per cent) and then office tenants (11 per cent).

CECRA Program Impact

Colliers believes that the impact of the CECRA program on collections won’t be clear until July. The Government of Canada opened applications for the program to provide financial support for Canadian small businesses on May 25, but it will likely take until July for owners and tenants to know where they stand with the program. There are also still areas that require further clarification, particularly around the administrative process and flexibility of legal agreement requirements.

“It is in everyone’s best interests to work together to ensure a safe and successful reopening,” says Duda. “Tenants and landlords are familiarizing themselves with the government’s rent relief supports, and many landlords are taking proactive action to find mutually beneficial solutions.”