NSW real estate body expects wave of retail rent negotiations, as Westfield offers deferrals to Sydney tenants

The peak body for real estate agents in New South Wales expects a wave of negotiations to take place between small retail tenants and their landlords, following Scentre Group’s move to offer rent deferrals to retailers.

Scentre Group, owner of Westfield malls in Australia, contacted its small tenants in centres across Sydney last week, saying it was committed to work with them to help mitigate the disruption of the lockdown with rent deferrals, according to The Australian Financial Review.

Just days later, the New South Wales government announced it would offer up to 100% land tax concessions for commercial landlords who provide rent relief.

Tim McKibbin, chief executive of the Real Estate Institute of New South Wales, says based on what happened during last year’s coronavirus outbreak, many independent landlords will also feel obliged to help their retail tenants with rent reductions and deferrals.

“The majority of landlords last year recognised that they had to help their tenants, and I think part of that was a humanitarian response, and part of it was a commercial response,” McKibbin tells SmartCompany.

While the federal government’s code of conduct for commercial tenancies lapsed in March, New South Wales legislation still gives retail tenants who can’t pay their rent due to COVID-19 some protection from evictions.

Changes to NSW’s Retail Leases Act requires property owners to first renegotiate rent and attempt mediation before evicting tenants if they are unable to pay their rent due to COVID-19.

McKibbin says the perception that most commercial landlords are large property groups is incorrect because the majority of people in the retail property market are “mum and dad investors”.

“The big landlords are in the shopping centres and the smaller landlords are in the strip shops,” he says.

While McKibbin expects many so-called mum and dad investors to access land tax relief and negotiate rent reductions in good faith, he says the amount of assistance they could offer depends on their financial position.

“Their circumstances will be different to each other and different to the likes of the bigger landlords,” he says.

McKibbin expects the NSW government to make further changes to leasing legislation to help landlords and tenants manage their negotiations throughout the continuing lockdown.

“We haven’t yet seen the regulation which will prescribe for both the landlords and the tenant how they’re going to deal with one another,” he says.

“If it’s done equitably and sensibly then the regulation will bring process to it and that’s useful.”