In my last opinion piece for this News in Brief, I commented on “time for recovery” and the need for Landlords and Tenants to work together to share the load, rather than just one party bearing all the strain.
In the past few weeks, it has been evident that not all is well in the recovery phase of Covid-19, but conversely, I really am stretching my imagination to determine that all is as a result of the Virus. In fact I believe that some people, but not all, are using it as an excuse to exit premises that have been unprofitable for some time. In addition, efforts by Retail NZ and the Property Council of NZ in an effort to seek a solution to Landlord/Tenant rental predicaments seem to have jointly fallen on deaf ears of the Government who are cautious about upsetting the coalition in an election year.
Retail companies that have indicated recently, the intended closure of stores include Flight Centre, H & J Smith, Bunnings, Smith City, and The Warehouse to name a few, but are all as a result of the impact from Covid-19?
H & J Smith, opened their first store in New Zealand 120 years ago in 1900. They have been a family run company ever since and a very proud retailer with their main Store located in Invercargill and other satellite outlets in other South Island locations. They have contributed significantly to retail in New Zealand. Some years ago, they decided to take over the Arthur Barnett Store in the Meridian Centre in Dunedin, and I recall congratulating them on taking over the space and salvaging what could have been a detrimental outcome for both the Meridian and Dunedin by the closure of a major department store. In the past 10 days they announced their intension to close the store, although this preliminary decision is being reviewed with a chance that the impending closure may be salvaged.
I doubt that H & J Smith being such a proud retailer would have ventured into a closure position unless their trading from the store had become untenable. I doubt that the Corona Virus would have been the cause but rather assisted the decision.
The situation demonstrates however, the difficulty that Landlords have in obtaining and then retaining key department store or major retailers in shopping centre environments. It is imperative that landlords retain these large tenants for the sake of survival of their shopping centre, or for the sake of their retail building that houses a large tenant. Without a major tenant as an anchor the impact on smaller retailers who depend on the attraction of a major for survival will be catastrophic.
Other retailers such as Bunnings and The Warehouse have indicated closures of stores in mostly regional locations, not all of which I suspect are Covid-19 driven but rather due to historical trading performances. The opportunity however for companies to soften the impact of closure and public commentary is to do so under the blanket of a pandemic.
I have really struggled in recent days to satisfy an answer to the debate as to rent relief for tenants. The traditional approach seems to be that if relief is not determined in a lease then the tenant is not entitled. But if the tenant cannot access the landlord’s premises, as was the case during Covid, then it is neither party’s direct cause, so why should one party be impacted more than the other? I have debated this with some Landlords who seem to take a privileged position rather than sharing the cost of the closure.
Surely, it would be prudent to share the cost of recovery rather than risk tenant decline.
I now fear that the outcome of this pandemic will ultimately result in pockets of large empty buildings arising throughout the country with a focus on Regional locations, if the recent announcements by both Bunnings and The Warehouse are anything to go by.
I hope that H & J Smiths position particularly in Dunedin, can be recovered, and I hope that Landlords throughout the country seriously ponder on the outcome of either vacant buildings or lesser rental as a means of maintaining retail representation particularly in regional locations. Whatever the outcome however, I think we need to be prudent when blaming Covid for the demise of all retail environments.
Challenges certainly remain for both landlords and tenants, and despite some commentators suggesting that all remains well in property circles, the closure of large retailers does not bode well for property Owners where the vacated space will be extremely difficult to refill!! Ultimately, we all have a responsibility to our respective communities, in working together to save jobs and assist in the resurrection of the total country’s economy. Some pain by all is better than all the pain for one!!
Commercial Bay is Open!
After many years of anticipation and unfortunate delays, it is great to see Commercial Bay finally open. A special Congratulations to our client Green Cross Healthcare whom we have worked with to develop this Life Pharmacy concept. Make sure you get out to see the Centre and be sure to pop into Life Pharmacy.
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House sales in Auckland and New Zealand are almost 50 per cent down on the same time last year, yet prices continue to reach near-record highs.
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The Minister for the Environment says there is a trade-off over who can participate in submissions on 11 new fast-tracked infrastructure projects.