'Room for improvement': A look at pandemic relief measures
The first half of 2020 saw government implement assistance schemes that would have previously seemed unimaginable.
In commercial leasing, the primary intervention was the mandatory Code of Conduct for commercial tenancies introduced by federal cabinet.
The code set forth a range of ‘good faith’ principals so landlords and tenants could find mutually beneficial solutions to the lockdown challenges. Among its measures, the code prevented landlords from terminating leases due to non-payment of rent and allowed for negotiated rent deferrals, waivers and lease extensions.
The code was adopted by all states and territories as a foundation for their own emergency rental legislation.
Jason Stevens, commercial director with Herron Todd White Melbourne, said the assistance was necessary and effective at the time. “It gave businesses a bit of breathing room in uncharted waters,” he says.
“For leases that came up for renewal or expiry, we saw them roll over for another short-term period, usually 12 months.
“Office tenants were also getting rent holidays and/or deferrals, which were to be paid back once things had righted themselves. We’re seeing quite a lot of leases now which include COVID-19 relief elements being paid back monthly.”
But assistance of this type, which can at times mess with free-market drivers, was never intended for the long term. Office space leasing has now returned to pre-pandemic engagement and deals appear to have normalised once more.
“When the lockdowns finished there was a big bounce-back in the office markets,” Stevens says. “A lot of corporates who thought they were going to be badly affected weren’t that badly hurt. In some cases, those businesses strengthened.”
Julia Batterley, head of office management at Colliers, says the code worked well but there was some room for improvement.
“The government did a good job doing something quickly, but we are still negotiating a lot of the rent relief packages because it’s been quite hard to implement,” she says.
“I think they probably should have based the qualifying criteria on a reduction in profit rather than revenue because, for some tenants, their revenue might have reduced … but because they’d let a lot of staff go and they’d cut other costs, their profitability went up.
“The most effective agreements we saw were ones where we could extend leases and bring the incentive forward to the rent-free period.”
