The Code will be legislated and administered by State and Territory governments, and binding mediation will also happen under State and Territory rules.
Impact of the Code on assets post COVID-19
Maldonado says landlords, particularly those with retail tenants, are fighting the impact of COVID on three fronts – helping tenants stem the immediate bleeding; building a strategy for the post-COVID environment that can be put to boards; and digesting and implementing what the Government is doing, both through stimulus and the Code.
“And all of it is simultaneously with major knock on effects with differing outcomes depending on different scenarios,” he says. Markedly, the current crisis is expected to reshape retail shopping and consumer behaviour for some time to come.
“As well as negotiating with tenants in the short term, landlords will have to consider the credit worthiness of tenants being able to pay back the 50 per cent deferred rental and the impact on their ongoing viability. They will also need to consider what tenants they want and need in their centres when everything re-opens.
“Even more than that, they have to work out what their definition of a shopping centre will be and its ongoing role in the community,” he says, pointing to a growing expectation that once people are allowed out of isolation, there will be a clamour for experiences and re-socialisation.
“How will their centres look with the businesses that will re-emerge and will they be the same business coming out of this period as going in. These will also be key considerations which will affect their assets post-COVID time. It also means they may have to start thinking about different anchor tenants.”
EY real estate partner Richard Bowman says that so far, they have seen a pragmatic approach from both landlords and tenants.” But it will be important that both parties adopt a robust governance and methodology as the volume of requests within the market will spike now the Code has been introduced.
“It’s also important to remember that office tenants are different to retail tenants. The impact on office landlords will be felt long after the office tenants move back in. Retail we expect to see trade return quickly,” Bowman says.
“If landlords can help tenants out with office abatements and help reduce costs, employers can avert layoffs which are bad for the workforce and ultimately bad for landlords because vacancy rates will rise and rents will fall.”