Business

Covid-19 lockdown: Small businesses desperate for commercial rent relief

09:07 am on 3 April 2020
Rachel Thomas, Senior Reporter

Small business owners say commercial rent relief is desperately needed if they are to survive past the Covid-19 disruptions.

Photo: Unsplash / Benedikt Geyer

While the wage subsidy helped with staff costs, there is currently no government assistance for commercial rent - which typically accounts for 40 percent of a firm's fixed costs.

Landlords and tenants have been working out arrangements on a case-by-case basis, leaving some to argue they had not got a fair deal.

Auckland creative Peter Barrett's work may have dried up overnight, but his commercial rent had not.

The film and TV freelancer said since Covid-19 had forced many New Zealand businesses into hibernation, rent had been a huge concern.

"We haven't just put the economy on ice. We haven't just found a situation where the music stops, everyone stands still, and in four or six or eight weeks the music plays again and off we go.

"The costs carry on, but the income is frozen."

After a bit of a push, Barrett's landlord agreed on a 50 percent rent reduction while the country remains at alert level 4, and he would like to see this mandated.

However, for some that was not enough.

A storage and freight operator said his landlord had also agreed to a 50 percent rent reduction - but that was before things got really bad.

The Auckland owner-operator, who asked to remain anonymous, said with his business flatlining, he had no means of paying it.

"I told him the situation had changed so much with my company that I won't be able to offer anything at the moment. So I'm planning to leave the premises. That's how bad it is."

Loans are available, and some landlords are offering rent deferments with an expectation the tenants pay it back over time.

But the storage and freight operator said the issue of not generating income to pay that loan or rent back remained.

"We are dead at the moment. Now we're going into winter, there won't be much movement. If we get a loan from the government, we won't be able to pay them back and the banks will be after us.

"Basically, I might as well shut down."

He said grants were needed, not loans.

Peter Barrett said many landlords - including his own - had multi-million dollar portfolios which would not devalue during the crisis, but small businesses lived month-to-month.

Wellington commercial property tycoon Ian Cassels said he was willing to work with good tenants, but people should not assume all property owners were rich.

"In some cases, the tenants won't pay or will only pay half the rent - and in some cases they'll never pay that."

Some tenants had approached him already and he was working with them on a case-by-case basis, he said.

"I don't think there's any one size fits all. If somebody's going to have a hard time for three months or six months but be fine thereafter if the world gets back to some sort of normality, then that's something that should be able to be worked through."

Meanwhile, a Canterbury landlord has devised a plan with his major tenant for total rent relief.

Peter, who did not want his last name used, leases most of his space to a real estate company.

He had agreed to a 100 percent rent write-off while lockdown continued, and then 50 percent reductions for two months after lockdown ends.

Peter said he and his wife would live on their savings, their pension, and take a bit of a hit.

"In these circumstances, we're okay, we're just breaking even. Giving them the best chance possible to recover, long term, is in my best interests."

The Ministry of Business, Innovation and Employment did not respond to questions for this story.

But the government has said it was considering new measures to help commercial tenants pay rent.

Minister of Finance Grant Robertson has admitted support was needed for those who needed help and had not managed to sort out a way to pay rent.

Minister of Finance Grant Robertson. Photo: RNZ / Dom Thomas

"Lots of tenants and commercial landlords have come to good arrangements already about that and that's to be encouraged.

"Unfortunately, that hasn't happened everywhere so we are looking actively at what can be done there... to support especially those small-to-medium enterprises."

An announcement is expected in the coming days.

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