• Wendy Thomson

The Journey – Commercial Property Management and COVID-19

Updated: Feb 8, 2021

The COVID-19 pandemic has brought with it many unique challenges, particularly in parts of Victoria, which are currently in a second period of lockdown that also includes closure of the Victorian–NSW border. For CPMs navigating this brave new world we now live and work in, the harsh reality of this second lockdown is that many of our tenant businesses will not survive. With an outlook as grim as this, what does it mean for CPMs whose responsibility extends to both tenant and landlord, and are CPMs receiving enough support?

While a CPM’s ultimate goal is to ensure a reliable income stream and a maximum return on capital investment for their landlord client, it is their relationship with both landlord and tenant and their ability to maintain a workable balance between the expectations of both parties that are critical to achieving success. When an unprecedented situation such as COVID-19 sends everything into freefall and there is no obvious end date, those expectations suddenly become more complex, and the vulnerabilities of such an interdependent relationship are exposed and could even be instrumental in its collapse.

CPMs are at the frontline

Most CPMs will have found themselves inundated with requests for rent relief. In an effort to be both sympathetic to a tenant who finds themselves in a situation beyond their control and the need to deal with the financial flow-on effect to the landlord, many CPMs will have felt under pressure to ‘save’ businesses by enabling tenants to remain in investment properties, which in turn, hopefully maintains an income stream for their landlord clients and of course, income for their agency. In many instances, CPMs struggle on without strong leadership or support from agency management. And if management itself has little support from industry bodies or other advisers, it is ill-equipped to assist those at the frontline anyway.

How does this happen?

A lack of support from agency management could be indicative of a ‘business as usual’ approach. More likely, however, it is the case that management just does not know the answers to this new challenge – an unprecedented event for which there is no template on how to respond – and are facing bigger issues concerning the continuation of their agency business in a precarious and dynamic situation. The task of handling rent relief and the issues associated with it are made even harder because:

  • Legislation and regulations relating to commercial property differ in each state, can be ‘as clear as mud’, and in the absence of reliable precedents, even legal advisers are unsure what advice should be offered.

  • CPMs, often without the necessary expertise, are required to interpret the law and negotiate with tenants who are ‘expert’ at translating and applying any favourable media report or website article to their advantage.

  • Commercial agencies seem to be working in their own silos rather than in an environment of connectedness and cooperation.

  • There is a lack of understanding of the intention of the National Cabinet’s Mandatory Code of Conduct, the meaning of each state’s retail and commercial leases legislation and how regulations can be made to give effect to the Code.

The first battle is won, but what about the war?

Most of us have successfully managed to deal with the first round of rent relief with landlord support, and many businesses looked like they might just survive. A return to Stage 3 restrictions in the Melbourne metropolitan area and Mitchell Shire, new restrictions now applying to parts of regional Victoria and the closure of the Victorian–NSW border, may be a potential tipping point for those businesses – especially if they were initially sustained by the JobKeeper payment – and they may not survive this current lockdown. This Stage 4 second lockdown – and the potential for it to be extended - along with the new restrictions now applying to parts of regional Victoria, raises new challenges and many questions, including:

  • How do we handle a tenant who is unable or refuses to pay rent and outgoings given that a landlord cannot evict them and they can remain in the leased premises?

  • Do state regulations and rent relief assistance extend past September 2020?

  • Given that many of these tenant businesses were already in danger of imminent failure prior to COVID-19, was saving them and merely delaying that failure the best solution, or should the National Cabinet have found a more realistic option?

  • The NSW government has amended its Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 to ensure that those tenants taking advantage of the ‘unable to evict’ situation and who are not an ‘impacted tenant’, are not able to avoid action arising from failure to remedy any breaches. Victoria, where are the amendments to our regulations?

A combo of information, advice & support is the CPM’s best weapon

When it comes to industry priorities, it seems that commercial property is considered secondary to residential property, and if representative industry bodies do not actively and accurately advocate on behalf of CPMs and their agencies, many of those working in a dedicated commercial property management field are often disregarded and in an emergency like this, may find themselves without adequate support to call on.

So, is there a solution? Because of the unique nature of commercial property management, perhaps CPMs could support each other by forming a dedicated commercial property practitioners interest group. Such a group could have a twofold purpose:

  • Preserving the integrity of information and advice. Unless information and advice are sought from primary sources, they have the potential to be filtered, skewed and in many instances, misinterpreted and misapplied. Consulting actual property practitioners would avoid such issues – not just for external organisations, but also for other CPMs.

  • Consultation. Establishing a reputation for professional excellence would encourage government to seek the group’s opinion and assistance when drafting relevant legislation. The anecdotal data of CPMs’ real-life and real-time experiences would serve to broaden the considerations and scenarios that legislation should take account of.

At a personal level

As 2020 continues to be a particularly challenging and stressful time for CPMs, it is important to maintain good physical and mental health, a sense of humour and patience. Be kind to your clients – both landlord and tenant – and also to your colleagues. And, if like many people, you are reviewing your work and life goals and assessing what is really important to you, make sure that you take enough time to do this.

Walk, meditate, rest – whatever it takes to get you through this. There will be life on the other side of COVID-19. It will be different but if you are up for the challenge, you will not only survive – you will thrive!

Author: Wendy Thomson

Email: wthomson@wendywho.com.au

© Wendy Thomson 2020