U.S. MarketFlash:
COVID & Collections: Are Occupiers Paying Their Bills?

The COVID-19-induced recession has put a focus on companies’ ability to meet their financial obligations, including rent. A recent analysis of cash payments within CBRE’s 800 million-sq.-ft. U.S. commercial property management portfolio found that some property types are doing better than others.

Cash payments—which include rent, operating expenses, utilities, taxes and security deposits—are a good indicator of occupier health and a proxy for rent collections.

Office

• Cash payment for office properties bottomed in May at 82% of pre-COVID levels and recovered to 95% in June.
• Primary markets saw significant declines in cash payments but are now recovering, while secondary markets continue to exhibit signs of stress.

Industrial

• Industrial cash payments bottomed in May at 90% of pre-COVID levels and primary markets fully recovered in June.
• Some secondary markets continue to show signs of stress. Still, cash payments in most major markets are either close to or fully recovered.

Retail

• Retail was hardest hit with cash payments at just 62% of pre-COVID levels in April but has since recovered to 88% of pre-COVID levels in June.
• Most primary markets have yet to recover. Notable exceptions are Orange County, CA and Chicago, which are close to pre-COVID payment volumes. Many high-performing secondary markets such as Atlanta, Charlotte, Dallas, Nashville and Phoenix have also largely recovered.

Figure 1: Cash Collections by Property Type

Note: Cash collections data is indexed from December 2019 at a level of 100.
Source: CBRE Property Management, August 2020.

The Bottom Line

Cash payments were down at the start of the COVID recession, with retail showing the highest levels of stress. All property types saw a strong recovery take hold in June and continued to improve in July. Recent COVID-19 flare-ups across much of the U.S. may interrupt the improving cash payments trend in the weeks ahead. Risks remain until effective therapeutics and a vaccine can end the health crisis.