Rent collection across NSW falls as extended lockdown takes toll
As the lockdowns in large swathes of the country drag on, they’re increasingly crushing the ability of businesses to pay their rent.
The latest figures from commercial property management software company Re-Leased show that rent collected across all NSW commercial real estate sectors this month dropped by seven per cent from June 2021, when the lockdown first began.
That fall was hardest for the retail sector, which plunged a massive 11 per cent, while office rent collected dropped by five per cent and industrial rent by four per cent.
In Victoria, where this current lockdown has been shorter, the total rents collected across all sectors showed no change over the past two months as increased rent in the industrial sector offset retail rents falling three per cent.
“I think it’s coming down to how businesses can, or can’t, operate during lockdown,” said Re-Leased CEO Tom Wallace. “That’s why retail has been hit the hardest because if you can’t operate, you can’t pay your rent.
“Office rents haven’t been hit quite so hard – in NSW falling by five per cent and in Victoria by just one per cent – because so many companies are still running with their staff working from home, although not at full capacity. But the NSW lockdown has gone on so long now, it’s really affecting businesses’ capacity to pay rent, and many are really struggling.”
The real-time data paints a grim picture in NSW of both tenants and landlords of commercial property being severely impacted by the continuing pandemic crisis. Beneath those figures are hundreds of stories of the pain of financial stress and the heartbreak of having to consider shutting up shop for good.
Restaurateur and chef Luke Mangan says many businesses are now really hurting. “It’s all gone on much longer than we expected, and we’re still waiting for some firm news on when we can reopen,” he said.
“It’s very hard for hospitality with so many restaurants and cafes having to pay their rent and food bills from April, May and June, but with very little coming in. Last year, there was rent relief that we haven’t had this year, and many landlords are trying to claim full rent from businesses that just can’t pay it. They’ll need help if they are going to stay in business.”
He said, in hard-hit NSW, he’d been having talks with the state government Treasurer Dominic Perrottet about the need for extra help with small business taxes and more vouchers for customers to encourage them to spend when the state emerged from its lockdown.
But that might come too late to save many, believes Mark Lockwood, director of transaction management at Tenant Representation Services. Last week, he received a flood of calls for help from desperate business owners, unable to pay their rents.
“People just started to ring me about rent relief,” he said. “They’re now wanting to talk to their landlords about rent relief, and they’re asking me to help them because their revenue has dropped, and their cash flow isn’t enough to keep them going.
“They’re realising that there mightn’t be light at the end of the tunnel until towards the end of November or maybe even at Christmas. Every day in the Sydney CBD, I’m seeing another For Rent sign over a space. But rent relief from landlords isn’t as definitive and legislated for as last year, and people don’t have the working capital to hang on.”
With rent arrears piling up, those in the most trouble often don’t even have the option of putting their businesses up for sale, advises hospitality broker Lola Lang, principal of Lang Consultancy.
“Businesses are hanging on by a thread, but they realise this is the worst time to sell,” she said. “They know they won’t get a decent price. So, they’re in a very difficult situation, and sometimes their landlords haven’t wanted to help or understand.
“No one really recovered from the last lockdowns, and now they’re facing this one. They’re being very, very heavily impacted. It’s bad in Sydney, with a lot of businesses at least 30 per cent down. It’s a tragedy.”
At the same time, according to Re-Leased research that covers 25,000 tenants across Australia, rent credited by landlords – whether it’s been written off by necessity or through kindness – is also 1.4 per cent up now in NSW, compared to the same time in June 2021. This is being taken as a further sign that tenants are struggling to make rent payments, with landlords having to step in and offer discounts.
In the retail sector in NSW, the rent credited rose by 1.6 per cent, in the office sector by 0.2 per cent and in the industrial arena by 2.6 per cent. In Victoria, across commercial generally, it’s fallen by one per cent, with retail rent credited actually decreasing by 0.3 per cent, office credits falling by 3.2 per cent and no change in industrial.
“In NSW, we expect the trend of falling rent collected to continue,” said Mr Wallace. “This is affecting both business tenants and property owners.
“People often think the landlords are OK, they’ve got their assets, and there’s not a lot of sympathy for them. But a lot of those landlords aren’t like Lendlease or Charter Hall; they’re mum-and-dad investors for whom this property is their retirement plan or their family trust. This is affecting everyone.”
