The Morrison government is considering whether to ask states and territories to extend commercial rent relief measures past September, amid fears of a spate of defaults heading into the crucial Spring/Summer trading period.
Australian Retailers Association (ARA) chief executive Paul Zahra is pressing the case with federal legislators that a temporary code of conduct guiding commercial tenancy negotiations amid the COVID-19 pandemic be expanded.
“There are many retailers under significant pressure, and the likelihood of them going into administration increases significantly after September,” Zahra tells SmartCompany.
While no decisions have been made yet, Zahra says an extension of government support will be crucial for retailers still unable to pay their full rent bills as a second wave of coronavirus infections shuts down large swathes of Victoria.
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“COVID-19 is such a moving beast, we get new information every day, and if you think about what’s happening in Victoria, we’re not out of the woods yet,” Zahra says.
“We’re heading into the most crucial period of the year over the fourth quarter … many retailers make most of their annual profit in those three months between October to January.”
Announced in May, National Cabinet’s commercial tenancy code of conduct forces landlords to grant rent reductions and deferrals to commercial tenants and prevents the termination of leases.
While each state has legislated its own code, the measures expire around the end of September — when retailers will also lose access to JobKeeper wage-subsidy payments and an insolvency pause that’s allowed businesses to trade without responding to creditor queries.
These are all ingredients for the so-called “financial cliff” being spoken about in industry circles, but the prospect of a mass spate of retail tenancy evictions remains real, with landlords under pressure to boost revenue and churn tenants for better results heading into Christmas.
Zahra says the prospect of tenant churn is a “real concern” but that landlords will lose too if they take a heavy handed approach to retailers.
“You’re not going to see a lot of new retailers come out of this period, it is a shrinking basket, it’s going to be easier for landlords to work in partnership with retailers,” Zahra says.
The Australian Competition and Consumer Commission (ACCC) extended its authorisation for members of the ARA and the National Retailers Association (NRA) to collectively bargain for rent relief last week.
The collective bargaining exemption will stand until September 2021, unless otherwise revoked.
Zahra expects the extension to help retailers negotiate better terms in the wake of the pandemic, particularly after the mandatory code expires in September.
“It allows retailers to at least have a conversation with others without fear of retribution,” he says.
This article was updated at 4:05PM July 6.