Webinar: Steve Urwin in conversation with Rob Harley
On Friday 27 March 2020, Steve Urwin and former Editor of Property for the AFR, Robert Harley, continued the conversation after another quite harrowing week. Reality set in as we saw restrictive measures move to Stage Two and we saw the government finally flag rental relief for retail and residential tenants, although nothing specific for commercial tenants, who were still awaiting direct assistance. That changed overnight with the prime minister’s statement. It significantly pointed to the parties sharing in the cost of any rental concessions.
Below are some of the key takeaways from the webinar:
Rob: Landlords are focusing on dealing with April – they don’t want to make deals for down the track because they too don’t know what’s going to happen.
Steve: Landlords are essentially managers (for shareholders, superannuation funds, sovereign wealth funds, co-owners etc.), so they need to be doing the right thing by their client, and they need time to do that. You’re right, the logical thing to do is to deal with the short term first which gives them time to pause and then consider the medium term and the longer term.
Rob: How can tenants and landlords work together as equals in this situation?
Steve: We are going to be judged on how we treat people in the next period. Some landlords have already shown that ability to park the lease, look at a reasonable solution and find a way to get through this together. The dynamic needs to change from “you’ve got a problem, how can we assist you?’’ to ‘‘we’ve got a problem, how can we work together?”. There needs to be a way to share the pain on all sides – tenant, landlord and government. I worry about dialogue from property industry bodies talking about defensive strategies and resisting government stimulus – this is the mindset we need to change.
Steve: I think there could be a number of structural changes to the industry. As for the future, we are going to see a drop in face rentals, even in Sydney. In the last 30-year period, we have seen constant growth of 4.2-4.5%, despite the inflationary pressures dropping. This time around, we should see a drop in face rentals.
Rob: Why won’t the landlords just adjust the incentives as they’ve always done?
Steve: They will try, but positions will get so desperate that the first one will break ranks and decide its time to reset and get that adjustment. It’s time to change.