Rent relief can’t continue, say mall owners

Shopping centre landlords say they can’t afford to pay more than the $1.6bn they have already doled out in rent relief.

A deserted Chadstone shopping centre in Melbourne. Picture: David Geraghty

Shopping centre landlords say they have provided more than $1 billion in rental relief to “mum and dad” businesses throughout the coronavirus pandemic, but warn they will be unable to afford further extensions to government codes providing relief to tenants.

Data provided by the Shopping Centre Council of Australia, which counts retail landlord giants Scentre Group, Vicinity and Stockland among its members, shows that since the Commercial Tenancies Code of Conduct was introduced in April, $1.6bn in rental relief has been provided mostly to small and medium sized businesses up to June 30.

The Commercial Tenancies Code of Conduct allows landlords and tenants who have been impacted by the pandemic to negotiate temporary relief measures.

It is enforced by state governments and says rent should be reduced in line with turnover reductions experienced by the tenants and any concessions a landlord receives should be passed on by way of rent reductions.

Politicians are mulling an extension because of the economic ramifications of the ongoing Victorian lockdown.

A total of 87 per cent of all small to medium sized tenants requested rental relief, with the hospitality industry the most in need of assistance, comprising 28 per cent of all rental agreements reached, the industry association said.

Retail services was next most in need of assistance, with harsh restrictions on hairdressers, nail salons and beauty parlours resulting in the sector comprising 19.4 per cent of all agreements reached.

More than two-thirds of the relief provided was to businesses in NSW and Victoria, which have larger economies and enacted the Commercial Tenancies Code earlier.

A total of $581m was provided in relief to businesses in NSW and $412m to businesses in Victoria.

Assistance to all other states and territories was roughly $600m.

SCCA Director Angus Nardi said that although it was in the shopping centre landlord’s interest to assist their tenants, they will be unable to continue providing relief in the event the Commercial Tenancies Code is extended beyond its initial expiry date of September.

“It is in our commercial interests as well as the broader economy that SMEs have longevity within our centres as they provide products and services our customers want and support local jobs,” Mr Nardi said.

“Our industry has provided substantial rental assistance to both SME and non-SME retailers, however we are unable to continue to shoulder that assistance, and for that reason, are not in a position to support the Code of Conduct’s extension where the cost of doing so falls exclusively on shopping centre owners,” he said.

“We have strived to strike a balance between helping those who need it while at the same time confronting our own financial pressures in the face of ongoing disruptions to regular trading to protect public health.

“Unlike others, our sector stands alone in having regulation require us to provide direct financial assistance to third parties, which must be financed from our own resources, which are now exhausted.”

Mr Nardi said that shopping centre landlords should be permitted to negotiate on a case-by-case tenants with landlords “taking into consideration a range of localised factors” and not be forced to negotiate along “formulaic” lines such as the turnover reduction requirement.