MELBOURNE COMMERCIAL PROPERTY UPDATE
The extended restrictions in place in Victoria have impacted landlords and tenants alike. Whilst the State Government legislation is currently due to expire on 29 September the regulations in parliament are proposed to be extended until 31 December, with further capacity to be extended until April 2021.
Rent increases for those leases that fall under the regulations are also prohibited until 31 December 2020.
Please also note the Office of The Small Business Commissioner in Victoria is suggesting the provisions of the Code of Conduct should be applied against all Commercial rent relief negotiations whether or not a tenant is eligible.
10% of rent relief negotiations completed by our office included deferral payments. These deferral payments were due to be paid back on a monthly basis from 1 October 2021. At this stage most are in the system and will invoiced to the tenant accordingly however the changes to the regulations may prevent this.
Additional rent relief
A tenant may request additional rent relief from 1 October, in some cases it may be appropriate to assess the entire rent relief package provided and also an opportunity to seek an extension of lease as part of the agreement.
It is difficult to accurately assess the impact to market rents, incentives and vacancy periods at this time. However, in discussions with mutual
colleagues who sit on the Commercial and Industrial Committee at the REIV, as expected we have seen a minor decrease in rents depending on the asset, an increase in incentives and extended vacancy periods.
Under current Stage 4 restrictions we are unable to complete inspections. Where possible the best outcome in the current market is to retain a tenant and maintain the value of the investment, providing a reasonable solution can be negotiated.
Numerous deals have fallen over across the industry since the restrictions have been in place, however there is still activity in the market we have leased two retail premises during the period.
Please note I have personally written to local members seeking action on the Commercial Regulations and restrictions to the industry.