COVID’S Impact on Rent Collection
It’s no secret that the economy has been suffering as a result of COVID-19. As a contractor, you may be wondering how this directly affects you. With many commercial properties facing shutdown or decreased foot traffic, they are losing money. Real Estate Investment Trusts are seeing the impact of this through rent collections.
Rent Collection by Property Type
While some properties, such as office parks and healthcare facilities, have reported strong collection percentages, retail properties like malls and strip centers are reporting as low as 50% of rent collected. The chart below breaks down these percentages by property type according to Nareit, a worldwide representative voice for REITs and real estate companies with an interest in U.S income-producing real estate, to give you a better understanding.
Source: Equity market capitalization weighted. Nareit survey of members, public disclosures, and FTSE Nareit All REIT index equity market capitalization as of April 30, 2020 via FactSet.
Source: Equity market capitalization weighted. Nareit survey of members, public disclosures, and FTSE Nareit All REIT index equity market capitalization via FactSet.
Shopping Centers Hit Hardest
As you can see, rent collection from shopping centers has been impacted the greatest by COVID-19. While roughly 47% of rent was collected from shopping centers in general, enclosed shopping malls only collected approximately 15% of rent. Other properties, such as healthcare facilities and residential homes were somewhat affected, but they did not take as hard of a hit as shopping centers.
Effect on Interest Rates
Interest expenses also are not likely to rise much as rates move higher, because nearly all the borrowings of REITs are fixed-rate debt. And, REITs have extended the average maturity of their debt to 75 months, locking in these low-interest rates until well into the next decade.
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