COVID 19-UPDATE 2 0 2 0

COVID 19-UPDATE 2 0 2 0

The outbreak of the Corona Virus (COVID-19) has had a significant impact on many market sectors and industries around Australia and the world. The Australian Government has announced several stimulus packages to support businesses totalling over $320 billion, which equates to 16.4% of Australia’s GDP. Locally, it is difficult to decipher the immediate impact on the various industries however it is clear that new measures and strategies are necessary to continue operating. A major problem has developed between tenants and landlords with respect to how rental payments are handled during the pandemic. At present, this is being handled on a case by case basis.

Owner Occupiers

Unfortunately, some businesses may not survive through these unprecedented times. Subject to business performance throughout this pandemic, there is the opportunity for owner occupiers to consider selling their property with a leaseback in place. This allows businesses to inject capital directly back into the business, maintain employment and to continue operating, as opposed to closing the doors. Over the next 6 - 12 months, we
may see properties come available that represent good value for money allowing all buyer profiles to pounce on these opportunities.

Investors still in the market

Given the recent RBA interest rate cuts to a historic 0.25%, it is safe to say that cash rich investors are still in the market. The market in Q4 2019 and Q1 2020 saw a lack of properties being offered for sale across all market sectors, resulting in increased competition and ultimately yield compression for quality investments. Throughout 2019, Queensland’s industrial market saw a substantial increase in investor activity, exceeding the significant activity seen in 2018. With the stock market proving extremely volatile, commercial property remains an attractive investment option for active investors.

Landlords & Tenants

Throughout these unprecedented times many landlords and tenants will be faced with tough conversations around the economic effects of COVID-19. Non-essential business closures will have and continue to have an impact on the ability for businesses to continue paying rent. The 6-month moratorium nationwide on all commercial and residential tenant evictions will provide much needed support for those eligible. It is critical for landlords and tenants to begin dialogue and come up with ways to continue the relationship and fulfil obligations to move forward through this period together. Outcomes we are seeing are rental payments reduced, sub-leasing of space, extension of term to cover loss during this period, and access to bonds and guarantees (as a last resort).