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Has The Commercial Leasing Code Of Conduct Provided Any Real Relief For Retailers?

On the 7th of April the National Cabinet released a Mandatory Code of Conduct on SME Commercial Leasing Principles During COVID-19, which stated that landlords should create arrangements with each SME tenant to share the financial risk and cashflow impact during the pandemic in a “proportionate manner”.

In practice, however, the country’s largest commercial retail landlords have been slow to provide relief to tenants.

A number of retailers we spoke to said that while they have had success negotiating lower rents with smaller landlords, they have faced greater difficulties dealing with major shopping centres.

One popular café and restaurant franchise that has over 20 locations told ChannelNews that they have come to satisfactory agreements with smaller landlords, with some offering 80% off their rent for a period of six months. One even gave them a 100% reduction for the coming quarter. However, there has been little or no progress with large mall owners.

This has left retailers in the lurch as they wait to see what commercial property landlords will offer, particularly for those retailers that are technically allowed to operate but have shut their doors due to safety concerns and low footfall.

Scentre Group, Vicinity, AMP Capital, Stockland, QIC Global Real Estate and GPT Group have all said in press releases that they welcome the code of conduct, but all emphasised they would be dealing with SME retail partners on a “case-by-case basis”.

Shopping mall tenants who have requested lower rental rates have generally been assigned someone to deal with their individual case. Any temporary rental agreements are confidential.

Some tenants told ChannelNews that they “have not heard anything at all” from certain commercial property owners. However, major landlords have said this is due to the large scope of cases that they are now dealing with.

Vicinity, for example, has said that their team “is talking to several thousand retailers and would again encourage anyone with questions or concerns about the process or their circumstances to reach out to the centre management team for support”.

A GPT Group spokesperson told ChannelNews, “With 3,200 tenancies across our portfolio of shopping centres, we remain focused on working together with our tenants to resolve the best and most suitable outcomes for their businesses to help them get through this period of disruption.”

Some tenants believe that the major landlords are waiting for the ‘mandatory code of conduct’ to be passed into law before finalising agreements. Statements from commercial property landlords and the Australian Retailers Association indicate that this may be the case.

“Our teams are working through how we implement and administer the code with our retailers so that we reach an agreement together based on each individual circumstance,” AMP Capital said in a statement. “Through our industry associations, we are also working with the individual state governments as they look to legislate this code.”

Scentre Group, which owns Westfield malls, did not respond when asked why it was taking so long to come to agreements with tenants and whether the group was awaiting legislation.

Paul Zahra, CEO of the Australian Retailers Association, told ChannelNews, “While state packages provide incentive packages for landlords to negotiate in good faith, we nevertheless urge the premiers of each state and territory to enact the mandatory code in their respective jurisdictions.”

States have brought in various packages to incentivise the code of conduct, such as the NSW government’s land tax relief package, which allows eligible commercial landlords to apply for a land tax concession of up to 25% for the 2020 calendar year.

“It’s too early to tell exactly how much of an impact the mandatory code is having,” Zahra told ChannelNews. “But retailers covered by the mandatory code have told us it gives them a much stronger leg to stand on in negotiations and provides a common framework for discussion, which has been very helpful.”

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