Record Low Rent Collection as NSW Reopens

Retail landlords in NSW have pocketed just over half of the rent owed in September, highlighting the deep hit to the sector due to prolonged shutdowns—and the long road to recovery.

The collection of rents across the month dropped to its lowest level since August, 2020 with 65 per cent of rent accounted for, according to figures compiled by the Re-Leased platform.

More than 5 million residents in Sydney had been stuck in a hard lockdown since June to contain the highly infectious Delta variant, which has since spread to Melbourne and the capital, Canberra, prompting lockdowns.

September marked the fourth and final month of NSW’s current lockdown with rent collection plummeting by 5 per cent over four weeks to be 10 per cent below the national average.

More broadly, commercial tenants—including office and industrial—nationally paid 82 per cent of all rents due, on par with rents paid in August but still down compared to pre-pandemic levels.

Re-Leased chief executive Tom Wallace said the gains across the year in the retail sector, hitting its peak in June, had now been lost.

“Retail rent collection has taken a major hit since June, particularly in NSW, where only 65 per cent of rents were paid by the end of September, down from 82 per cent at the end of June,” Wallace said.

“With the federal government signalling the end of financial aid, and states working on plans for living with Covid, businesses will face continued uncertainty.”

The Re-Leased report is based on anonymised and aggregated data from over 21,000 properties and 45,000 leases managed by its Australian commercial property clients.

It comes just a day after shops across NSW reopened at reduced capacity as the state achieved its 70 per cent vaccination target.

Under NSW government guidelines, the unvaccinated will not be able to shop freely until vaccination levels reach 90 per cent in December.

The announcement follows a 3.5 per cent drop in retail turnover across the state to be at its lowest level since the onset of the pandemic, according to the most recent ABS figures.

Unsurprisingly, the average lease length in the commercial sector nationally has fallen from a high of 2.09 years in August last year to now be at just 1.98 years.

Average lease lengths across all commercial sectors in Victoria have dropped from a 2.49 years peak in March to 2.28 years now.

In Queensland, the average lease lengths across all commercial sectors reached a peak of 2.19 years in September 2020, before dropping to 1.97 years by August this year.

NSW has shown some resilience with lease lengths across all commercial property sectors improving this year overall, growing from 1.74 years in February to 1.95 years in September.

“Although Australian people and businesses can see the end of lockdowns in sight as vaccination rates increase, these figures demonstrate there’s been a jolt in business confidence during the past year to commit to longer lease lengths in the overall commercial property market,” Wallace said.

“Contrary to the current strength of the industrial market, it is clear confidence in industrial property lease lengths have still taken a hit, particularly in New South Wales.

“The volatility in Victoria and Queensland also points to this lingering uncertainty.”

With the vaccine rollout gaining momentum, a staggered return to “normal”, including allowing fully vaccinated residents to enter and leave the country freely, is expected from November, although NSW plans to bring forward those dates.