Commercial rent rolls have taken a double hit with retail already in decline before COVID-19. Take a look at some creative ways to keep tenant numbers up and business coming through the door. 

Even before COVID-19, retail was undergoing a seismic shift. With the traditional bricks-and-mortar storefront being under threat from online shopping, it has become harder than ever to attract and retain commercial tenants. 

If your real estate agency oversees a commercial rent roll, the hit of COVID-19 may have you reeling. Overnight, even busy and popular stores saw their income take a massive hit. Many had to close while others made it very clear they won’t be able to pay what’s expected of them. 

With many landlords being mum-and-dad or small-time investors, a few missed payments from tenants can have devastating consequences. As the agency responsible for collecting rents and managing the properties, you are no doubt feeling the pinch as well. 

What now?

Take a look at tenancy laws in your state for updates on how to handle clients in crisis. There may be solutions from their lenders or other options you can agree on with them. 

While the first advice is for tenants, landlords and commercial property managers to communicate amongst themselves, to help get everyone through these times, the Victorian Government has announced a commercial tenancy relief scheme. 

This provides the following: 

• a six-month moratorium on commercial tenancy evictions for the non-payment of rent for small to medium enterprises with an annual turnover under $50 million that have experienced a minimum 30 percent reduction in turnover due to COVID-19, commencing from 29 March 2020

• a freeze on rent increases during the moratorium for commercial tenants

• a rental payment waiver or deferral proportionate to commercial tenants’ income reduction due to COVID-19, to be negotiated between the tenant and landlord

• a mediation service for commercial tenants and landlords, accessed through the VSBC, to support fair tenancy negotiations.

You can find out more here.

The businesses which operate from your premises are likely to be able to access a Government grant which will help them get through the crisis with less financial stress. Keep up the conversation to figure out how you can support them so they can continue to pay their bills. 

It’s also a great idea to speak with your own accountant. Review how important commercial leases are to your business. There may be an opportunity to purchase more at a competitive price or to sell your commercial rent roll to a motivated buyer. 

Thinking outside the box

While it is not strictly your responsibility, it does make sense to collaborate with local business owners, strata managers, retailers and council to breathe life back into commercial areas once restrictions are lifted. 

Keeping commercial zones, and in particular retail, alive, is partly the responsibility of local council. If there are expensive parking meters keeping people away, there may be an opportunity to lobby for a reduction in costs, or the total removal of paid-parking at certain times. 

There is one example in Melbourne’s Yarraville where residents campaigned to have paid parking removed so they could shop locally. An independent study found visitors to the village centre halved on weekdays and dropped by more than a quarter on weekends after parking meters were installed so the frustration of locals was understandable. 

Then there’s the all-important ‘pivot’ approach, where creative thinking comes into play to encourage an uplift in tenants. 

One trend is ‘pop up stores’, which take on a lease of a few weeks. This is ideal for retailers with surplus stock or those who wish to test the local market. If you have landlords who have lost tenants, this could be a way to fill the space while seeking a long-term solution. 

Another option is a ‘Co-op’ set up, which allows multiple vendors to ‘rent’ shelf space in a retail outlet. Trendy suburbs could welcome this approach for mini art galleries, with the artists paying a commission on sales. Local craft producers may also be interested in displaying their wares in this type of arrangement. 

The Co-op option requires some investigation and careful setting up due to the number of parties involved. Here is some information from Consumer Affairs Victoria.

Finally, depending on the features of the premises, a commercial property could be repurposed as a multi-functional space. Think shared office by day, yoga studio by night (post-restrictions, of course). 

There is an example in Carlton, where Bendigo Bank operates a space for retail, community and art.

With co-working on the rise, many companies will be ditching the traditional office but looking to rent meeting rooms and desks one or two days a week. This can be a great way to bring diverse people together and encourage local retail to come back to life. 

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