Coronavirus: eviction freeze stuns mall landlords
Mall owners face another wave of store closures this week, with smaller retailers expected to follow the lead of major tenants, including Myer and South Africa’s Woolworths Holdings, which owns DJs and Country Road, which have already shut smaller fashion stores.
The closures, costing tens of thousands of jobs, come ahead of more announcements from state governments that have flagged further restrictions to prevent the coronavirus spreading.
Commercial landlords and tenants have been told to work out a solution for businesses that have closed or whose revenues have plunged so they can remain operational when the crisis is over.
The Property Council of Australia has called for a balanced solution for an industry in serious trouble. “The risk is landlords get squeezed like lemons with falling rents on one side and obligations to financiers on the other,” chief executive Ken Morrison said.
“If landlords are able to support their tenants in need, which they want to, then they are also going to need support,” he said.
The federal government has called on landlords to share the pain with their tenants, and Finance Minister Mathias Cormann said on Sunday that commercial landlords had limited capacity to replace tenants, and he urged a co-operative approach.
But the crisis has also brought longer-term problems faced by malls to a head, with retail experts saying that some chains that have closed outlets will not reopen unviable stores.
Some landlords are trying to alleviate stress for tenants by deferring rent for April but others have insisted on being paid or have not provided detailed guidance.
Leasewise managing director Ange Kondos, who represents brands including Matchbox, Soul Origin, Breadtop, Jolly Miller, Kitten D’Amour and hundreds of smaller operators, says they will not pay rents while centres are effectively not running.
“Our message to all landlords two weeks ago was all rent payments are suspended,” he said. “The bigger conversation when this crisis ends is what is the new normal and what can retailers afford to pay then?”
Some owners, including GPT and QIC, have offered to defer rental payments, but Mr Kondos said this would not be the long-term answer because retailers would have difficulty making up rent in tougher times ahead.
Vicinity Centres chief executive Grant Kelley said the company was focused on supporting retailers “now and for the long term”.
Landlords said privately they would be more inclined to make allowances for smaller operators rather than national chains with deeper pockets. “Landlords and retailers are going to take some pain and the government is going to have to take a bit of pain; that’s how we will work together to get through,” one landlord said.
Senior retail figures said mall owners would also need to adapt redundant areas in their centres and redevelop them to incorporate new business, including offices, medical and educational firms.
The need for a dramatic shift is coming when landlords are short of capital as their share prices have been beaten down.
“It’s brought forward store rationalisation,” said one senior industry player, who said many centres were simply too large.
“Once centres were back, fully operational key retailers would have leaner, more efficient networks that were more profitable, with landlords left to fill spaces they departed.”