Rent day arrives for struggling retailers
"We're almost 90% open with most of our retailers trading. It's a return to almost normality," says James Roberts the boss of Grosvenor Shopping centre in Northampton.
But there's one big question. How many of the 50 or so retailers and food outlets will be paying any rent this week.
He laughs nervously when asked.
"Hopefully some, but we've only collected 56% in the last quarter," he says.
UK landlords should be collecting at least £2.5bn on Wednesday for shop rents.
Retail landlords traditionally get paid four times a year.
On the last rent day in March, no more than half the total rent was handed over and landlords will be lucky to get a quarter of what they're owed today.
Most high street shops, along with pubs and restaurants, have seen sales evaporate and have either been unable or refusing to pay rent.
Businesses are hoarding cash to survive. But the crisis is starving landlords of much needed income, too.
The Grosvenor Shopping Centre is the kind of everyday mall you'd find in many of our towns and city centres.
It's owned by Legal & General which invests in property to fund thousands of pensions.
"It's not well known, or particularly transparent to people, but most retail properties are effectively owned by the normal person on the street in the UK," said Bill Hughes, Legal and General's head of real assets.
Income 'at risk'
Recent research by Estates Gazette, a commercial property weekly, showed that as much as 60% of all UK retail space is owned either directly or indirectly by the public, including pension funds, the public sector and individual shareholders.
It's been a secure form of income until now.
"The risk of loss of income is really important. The pension fund owners of the built environment of the UK, they rely upon the income being produced by what hitherto have been seen as being very stable assets. And that is at risk in a way that's never been there to the extent before." said Mr Hughes.
Landlords have enjoyed the good times over the decades with long leases and upward-only rent reviews.
And rapidly expanding retailers were happy to sign up. But in recent years with sales shifting online, it's become far harder for shops to make a profit.
The pandemic has accelerated this trend. The Government extended its ban on evictions for non-payment of rent until the autumn.
Occupiers are now frantically trying to secure better deals or turning to insolvency proceedings to renegotiate their debts, including owed rent.
The traditional business model of how retail property is leased is now well and truly broken.
"It's a mess, but it's not a mess that we can't tidy up" said Mark Burlton, the founder of Cross Border Retail, a real estate business which advises landlords and retailers.
"I do feel sorry for them (landlords) . Absolutely. They are entitled to receive income, but I don't believe they're entitled to receive the same income as they were. I think they have to understand the value of their asset. And the value of their asset is what someone is prepared to pay for it. There isn't a queue of retailers coming up behind them," he said.
He believes upward only rent reviews should be abolished along with the Landlord and Tenant Act of 1954, the law which still underpins the leasehold system in the UK.
"It's inflexible. We need something which is much cheaper and quicker to negotiate. We should have a system of rents based on turnover, allowing retailers to pay a rent they can afford. But in order to do that, tenants have to play their part. They have to declare what they are turning over," said Mr Burlton.
Bill Hughes thinks the Government's new code of practice on rental agreements should ease the tensions.
"We're having an active conversation with tenants about can they pay, and if they can't pay, we're working hard to restructure things.
"Because it's in our interest to find a way of helping cash flow to companies that would survive beyond this very difficult, unusual crisis that Covid presents."
Legal & General's Bill Hughes thinks the Government should take a careful look at providing some financial support to help bridge the likely shortfall in income otherwise the "dynamic between landlords and tenants is likely to be challenging and deteriorate".
The future prosperity of our high streets and town centres could ultimately be at stake if this crisis doesn't end well.
Regeneration requires private sector investment as well as Government funding.
Mr Hughes says unless there's an appeal for long term investors like pension funds to invest in UK real estate, infrastructure won't get funded.
"They need a sensible and stable environment within which they can get some sort of return," he explains.
Mr Burlton says he's receiving phone calls from US private equity and venture capitalists sniffing around for opportunities to snap up some retail assets on the cheap.
"Ultimately if landlords and tenants can't agree what the actual rent should be, then a number of landlords face the very real prospect of going bust. And then we have to be careful what we wish for because the purchasers of these assets in my opinion will likely have much shorter goals than the landlords they currently have. "
The fate of heavily indebted shopping centre owner, Intu, will be decided by Friday. It owns some of the UK's biggest and most popular malls, including the Trafford Centre and the Metrocentre in Gateshead.
If it can't secure a last minute agreement with its lenders, it will go into administration which could mean the temporary closure of its sites.