Survey: Rent collections could decline another 15% in May
Rent collections in May are expected to fall another 10% to 15%, after declining on average 16% in April.
According to a NAREIM member survey, almost half of real estate investment managers expected May rent collections to be 10% and 15% below those of April.
The survey, conducted between April 20 and 23, revealed portfolio-wide rent collections in April were 84%, but investment managers were bracing for May collections to be significantly lower.
A total of 44% of NAREIM members were underwriting rent collections in May to be between 10% and 15% below those of April, while 22% of members were expecting declines of 5% to 10% on April rent payments. Just 17% of managers expected rents to decline a further 0% to 5% in May, while another 17% of members expected rents to fall 15% to 30% below the levels seen in April.
In April, an average of 84% of rental payments were collected, according to survey participants. That figure, however, comprised wide differences between - and within - each property type.
Multifamily was the strongest property type in terms of April rent collections, according to NAREIM members, with 93.4% of rent collected.
Performance was strongest at Class A assets with an average 94.4% of rent collected in April compared to 80% at Class C properties.
Even at Class A assets, though, rent collections varied widely among survey participants. Individual NAREIM members reported collections in April ranged from 88% to 100% for Class A apartment buildings.
Office and industrial also saw a wide range of rental payments collected in April.
On average, managers invested in the office sector reported rent collections of 88.2% in April. However, individual responses revealed managers collected anywhere from 80% to 95% of April office rent payments.
For industrial, an average of 84.3% of rents were collected in April. The range of individual responses was again wide, starting at 75% of rents collected and peaking at 92.3% of April rent payments.
The majority of managers are working closely with tenants on rent relief, with seven out of 10 deferring rent. Others are also looking to rent reduction and the application of deposits as short-term solutions.
In the long-term, rent deferrals are seen as the primary tool to handle rent relief with some managers also eyeing loan conversions.
The NAREIM member survey on rent collections in April and May comprised responses from 18 corporations on a portfolio-wide basis.