Commercial property management company Re-Leased says half the rent owed to its landlord clients is now overdue, normally it would be less than 10%

Commercial property management company Re-Leased says half the rent owed to its landlord clients is now overdue, normally it would be less than 10%

There has been a substantial jump in rent arrears for commercial premises, according to commercial property management company Re-Leased.

The company said that by April 13 its commercial property clients (landlords) had received just 50.0% of the rent that was due to be paid on April 1, whereas the average that would normally have been received by that time over the previous two years was 90.2%.

That means that exactly half the rental payments were in arrears on April 13, compared to the two year average of less than 10%.

The hardest hit sector was retail, with nearly two thirds of the rent due for retail premises being in arrears on April 13.

According to Re-Leased, just 36.9% of the rent for retail premises that was due on April 1 had been received by April 13, compared to the two year average of 88.6%.

The next most affected sector was offices, with 55.5% of the rent due on April 1 for office premises having been paid by April 13 compared to the long term average of 91.9%.

Industrial premises were the least affected, with 70.1% of the rent due by April 1 paid by April 13, compared to the long term average of 88.1%.

Re-Leased said there had also been a substantial jump in the number of credit notes landlords were issuing to tenants.

"Credit note allocations are commonly used to waive either a partial or full amount of a rent invoice, which indicates both parties have come to some form of agreement about a reduction rent," the company said.

So far, credit notes had been issued for 6.3% of the total rent due on April 1, whereas that would normally be around 1.0%.

"As the month continues, this figure is expected to increase as landlords raise new credit notes to reflect agreements on rent relief," the company said.

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Can I predict and summaries the coming comments from readers?

"Good, those rich commercial landlords have had it too good for too long. I don't even own a house yet, so I want to see them lose all their money"


Allow me to offer a different view - I disagree with the premise that residential landlords "provide" housing, but commercial is different. Most businesses aren't in the business of owning property, a premise is just a place for them to do business. In that sense, commercial landlords do provide a valuable service. This article does make me feel really quite badly, because both businesses and landlords are suffering here.

I've been a commercial landlord for 20 years or so. Your take on it is correct - and both tenants and landlords tell me this. Tenants can usually earn circa 30% returns on their capital by running their business. They have no interest in tying up heaps of capital in a building which will return circa 6%.

With the capital they have (by not buying their premises) they can open another shop/branch etc.

True. But if your getting more than that you can put a stop to the incessant ratcheting up of rent every review, even though the LL has long since reduced his interest rate and you have paid off a great chunk of his mortgage. It then forms a great base for you to borrow against to grow your business as Banks are so friendly in leading to businesses - tui. "how much is your worth again".

Those businesses that own their premises do it for the right reasons. The want to keep the specific location, or the cost to relocate could be prohibitive.

Here's hoping the price of commercial property returns to the risk that is reflected in holding it. Too many new entrants have pushed up the prices of everything, without understanding the downside they are now facing.

Course the winners out of this ponzi scheme are the banksters and their bonuses, who are now increasing their investment with mortgage holidays. What an oxymoron that is!! Here's hoping a s..t load of these w..kers get made unemployed, and the government clap down on earnings to debt ratios when property prices find a more sustainable level; so they cant continue there ponzi scheme.

Please explain why you disagree with the premise that residential landlords "provide" housing?


Biggest danger here comes in the form of job losses not rent arrears.
Perhaps we should have stopped all commercial mortgage and rent/lease payments and let the banks suck it up until they (the business) can get started again, IF they can?
Lucky thing thing we have 500,000 temporary workers in country keeping the residential rents up.. until they lose their jobs and cannot pay the rent.. Interesting times indeed


Watch Auckland CBD property prices plunge by year's end. Apartment market will be nuked.

Retail premises prices maybe. Apartments are a different market altogether. The reasons people choose to live (and work) in the city are still valid.


A large proportion of apartment tenants in the CBD are foreign students and people on work visas. Not to mention Air B and Bs.
Cbd apartments will crash.

And B / C grade commercial premises in the CBD too.

Which are waaaayyyyy overpriced.

Actually I agree with that Fritz. I hasn't thought about all the foreign students etc.

My apartment tenancy expired the day after lockdown. I handed the keys over a day early to be the hell out of there. Nobody wants to be in an apartment building during a pandemic. They are effectively disease cesspits just like cruise ships. Apartments are about to get nuked.

Yeah. Some of the prices for those shoeboxes have got silly over the past 5 years. I expect CBD apartments values to drop by circa 30%.

Yeah I think they're way overpriced. But no more so than other property types in NZ.

Predictable. Friends and colleagues whom I know who own their own business's, I have always advised that if at all possible own the property they operate out of. Most have not initially understood, as their accountants were advising them otherwise, but once explained to them they have moved to achieving that. Those that managed it have seen a lot of pressure lifted from them.

If businesses own the property they operate out of, they necessarily have a lot less capital to invest in their business. IMO better would be an emergency cash reserve. You're still tying up some capital but not nearly as much, and you aren't exposed to the property market.

it depends on the business and the building, some tenants can spend a lot of capital to outfit the building to specific requirements so in that case it can make sense to own the building, others can move from building to building no problem as they have very little setup cost and don't require specific things in that case its best to lease

What are normal arrangements in such case? Does being in arrears usually come with penalties? Or can you "safely" being in arrears without immediately incurring additional fees?

The normal situation (under the most commonly used ADLS lease) is that if the rent remains unpaid 10 working days past it's due date, the LL can issue notice that the tenant is in breach. And the tenant has a further 10 working days to remedy the situation. If they don't then the LL can re-enter i.e. end the lease.

But now those timeframes have been extended.


It really shows how hand to mouth so much business is, if you cant pay rent after a month, whats the chance of the business ever coming back ? There will be a ton of forced vacancies. I also think retail will change forever post this, a lot of people will keep social distancing for sometime post restrictions coming off. Online will flourish I would say.

"hand to mouth" can also be characterised as 'Efficient'.....Assets as an accounting class generally comprise:

  • Current - Inventory, cash, prepayments of future liabilities (insurance, rates etc)
  • Fixed/Term: Investments, plant, land/buildings, intangibles such as goodwill and intellectual property, software

Being prevented from trading means that even abundant assets such as Inventory or Work in Progress, are forcibly stopped from being sold (or in the case of Work in Progress) converted to inherently more valuable forms such as Finished Goods or Billable Services. Bang - all conversion to cash is toast.

So 'hand to mouth' is one of those meaningless epithets, without knowledge of the Statement of Financial Position. Slogans aren't Accounting.


I have a problem with efficiency as currently understood. What it has come to mean is with no redundancy built in to deal with unexpected-Black Swan?-events. I have seen this over many years with company balance sheets. Corporate predators call this 'lazy' and we see this today with Private Equity. They seek to extract value by buying up these companies and all too often, loading them with debt. Super efficient systems all too often work only under optimum conditions. I much prefer systems with redundancy built in. Thus, it could be considered 'inefficient' to stockpile masks and gowns against something that might not happen. There are many other examples.

OK, a made-up example. Clothing retailer, offshore sourcing with a lead time of 6 months including shipping. In August, contract for a full container of winter gear, 30% up front to secure. On the water in January-February. Pay the remaining 70% plus customs etc in late Feb. So 100%+ is out of the Bank and into Inventory. In normal circumstances, expect 20% sales in March, 40% each in May and June, and oh, in Feb, need to secure summer stock so 30% down on another container. Assume equal value, so we have 130%+ of inventory value tied up now, and bank is looking low. A bit of sales in March - maybe 5% of shipment. Just enough to pay staff and March/April rent.

Whoops. No trading rest of March and all of April. It's lower-end stuff, sold to lower-SES customers, and no online May and June look like 10% each tops.

There goes May and June rental, and you're on the hook for 70%+ of the summer container when that lands. Sure, you're Asset-rich: you've sold only 15% of the shipment if you're lucky, so there's 85% left plus that container on the water. But how to turn That into cash. So you have a chat to the bank, offering Inventory as collateral. Low-end, winter clothing and a container that's somewhere at sea. They laugh....

I dont know how excited I would be feeling if I ran my business that "efficient" ly. Is - Sailing close to the wind - better ? Saving for a rainy day ?

Many who were already suffering but were trapped by lease agreement (period) will now get an opportunity to move out.

Now most tenent should have the option to move out of lease or to renegotiate rent as going forward most business will not be same as before alternatively tenanet will be forced to default with arrears and landlords will be left with No Rent and No Tenent but Civil Suit or alternatively Landlords can renegotiate and be reasonable or wait for new tenent ( which may be years away).

Landlord should also remember that in current situation sympathy will always be with tenant so be reasonable now and survive.

In future when resetting, time will be Pre Corona Virus and Post Corona Virus just like BC and AD.

Not sure what the going rate is to rent a shop in Auckland CBD, but I would imagine it would be prohibited just like in the malls around NZ!
Always wondered how you could make it worthwhile operating a clothing shop in these malls, with all the costs involved.
At least with providing housing, you know that week in, week out you are going to be getting a rental return and capital gains should yo7 wish to sell for an unknown reason.
Personally, we have one large warehouse with offices and tenant has just paid their monthly rent, and don’t foresee any problem with them being able to pay in the future.
Residential have also all paid, so maybe it is not going to be as bad as many on here are hoping for??

At least with providing housing, you know that week in, week out you are going to be getting a rental return and capital gains should yo7 wish to sell for an unknown reason.

Residential have also all paid, so maybe it is not going to be as bad as many on here are hoping for??

Are you really a landlord or are you just trolling?

Of course I am a full time landlord.
Yes we have had no non payers as yet and I know many other smaller time landlords and they have had no defaulters in ChCh as well!

Look at me. Look at me. Look at how clever I am! Why would you comment like this when there is so much pain around you unless you are feeling pretty nervous about your situation. His lack of empathy and lack of sensitivity continues to astound me. One would also think he would have rung his tenants and offered them complete relief from rent while they cannot use their premises to generate business. After all he is so wealthy and successful or so he says. The fact his tenants have not asked for help does make me suspicious. Does he in fact have a commercial rental?

Gordon, we have a warehouse with offices and they are manufacturing currently and so there has been no change.
Our tenant is a long-standing successful business, with a long term lease in place.
I am not saying how clever we are at all, just pointing out that property done well is as safe an investment that there is, and that it is not going to be bad news for everyone in property like many on here suggest.
Tenants are either still working or getting the wage subsidy so in most cases there is no need whatsoever to reduce rents although we had a couple of cases early on where people were worried, but all now sorted.
If you or anyone wants to take up the challenge to you then I am up for it, as you should not be doubting what I say!

My Commercial Landlord just gave me a 50% reduction in rent and outgoings for the duration of the lockdown, he is a reasonable person and can see that doing the right thing now will pay dividends at a later date. I am very appreciative of this, and he likes the fact we are very reasonable and always pay on time.
Id suggest your commercial tenants read their lease agreement (27.5) carefully, then phone you to discuss.

We have 90 days in our lease!

Sluggy, why would your landlord need to give you a 50% reduction on your rent?
Did you ask him, because you needed it!
If a business can not afford to pay full rent to their landlord after being closed down for 3 weeks, it would tend to suggest that the business is struggling, and You would have to question long term viability wouldn’t you?

If half rent payable is missing, then perhaps just half the rent is payable?
I know it's not really how it works, but if:
Rent Payable = $1= 100%. but only 50 cents has been paid, (50%) then
Rent payable = 50 cents = 100% = 50 cents.

Is this an indicator that rents, in general, might fall "50%" so that occupancy rates can be held at "100%" ?
The option, for some, would appear to be maintaining rents at the current/past $1 and getting 0% lease payments (empty property) as those that can move to 50 cent properties..

An exercise for any commercial landlords with zero cashflow tenants in rental arrears -> ask your tenants if they can afford to pay 50% rent out of their current cashflow.

Obviously not with zero cashflow unless they are in a healthy free cash position or are lightly geared and their bank is willing to come to the party. With most people apart from civil servants suffering significant income drops and those with capital hoarding it, a significant hollowing out of SMEs is inevitable.

Here's the thing. Out of all the main costs of running a retail business ~rent, rates, staff, product, utilities only two of these are variable ~ staff and rent.

You actually need staff so after a certain point that cant be cut. Rent however can be cut and will be cut to the point business remains viable.

It just means the capital and rental value of the retail space falls to match the new environment.

The govt cannot and should not interfere with this natural market dynamic.

Yes, its interesting to see the way the commercial leasing segment is by and large working collaboratively with tenants to navigate a way though this absent the dead hand of direct government intervention, as is occurring across the ditch. That's not to suggest Robertson shouldn't at the macro level continue to deploy support initiatives.

Re leased provides property management software. According to its website , its footprint in New Zealand, that is the delivery of property software , is relatively small. Do the figures relating to rents stated in the article apply to New Zealand. ?

Yes, they are small and thus not really authoritative but their data feels about right from anecdotal observation. The experience of our SME associates is that most building owners are proactively making significant concessions. But that a value haircut is coming for building owners is apparent to all except the property cheer leader squad who seem to think they'll be exempt from the slash and burn of REITs and retirement village operator shares.

Hi there, Tom Wallace of Re-Leased here. Yes, the data quoted in the article is all NZ property and we are seeing interesting data coming out of our other core markets UK, USA and Australia that tell a different story. For reference, the data sample size is from more than 10,000 properties and 30,000 unique tenancies from across the country.

Hi Mr Tom Wallace thank you for your response. Truly numbers that underscore the gravity of issues being faced by many parties . I wish your company well in a rapidly changing environment. Undoubtedly the data will provide information of benefit going forward. I assume, unlike Wimbledon , no one ,either tenant or owner had pandemic insurance.

Yikes, all of this after just 3 weeks of closure. It doesn't bode well for the coming months. Particularly if you take into consideration the PM's guidance today that many retailers will not be able to trade under level 3 lockdown protocols.

Well Basil, they could trade if common sense was exercised but , you see, NZrs being largely infantile in their thinking and actions simply can't be relied upon to maintain safe distancing. Yes, I know you little children are presently are doing this very well in your local dairy, out walking etc but we all know your behaviour would suddenly regress if you went into a butcher shop. I just wish NZrs were like those sensible Australian people who can be trusted to make appropriate judgments.

As witnessed on my limited trips to the Supermarket. People don't possess the spacial awareness required to maintain safe distancing. Standing "double parked" with their trolley while they contemplate which brand of tomato sauce to buy or fluffing about on their phone in the produce choke-point. It's fine if other people are patient and wait....but otherwise safe distancing is not being adhered to.

Exactly Basil why did the wheels fall off this fast ? Many companies close at Christmas for up to 3 weeks and yet a couple of days into level 4 it was suddenly the end of the world.

You budget for Christmas T/O reductions and accumulate from previous trading for leave and other fixed costs. Only a select group of soothsayers saw this ugly sucker coming.

Companies budget an 11 month cycle to account for four weeks of nothing. Then you have to pay all your prov tax etc after your holiday pay. Most companys budget for a boomer April with new budgets. Not this year.

For some SMEs that supply non-deferrable ( long term anyway) May will see a strong catch up bounce that will include a reasonable chunk of normal April sales but after that elective spending will fall over the cliff.

or the ones that can trade will not need as much space, food retailers will only be able to do drive through. delivery, or click and collect.
so they don't need the space for people to sit only kitchen space.

Yep, and magazine businesses could have been directed to seal their product in plastic or make them non browsable in supermarkets.

Don't' overlook the flow on affect re rates. Less and less ability out there to pay and more and more demand on councils. S more and more rates loaded onto the fewer and fewer left standing.

A tough time to be a landlord of any sort.

and who is responsible for all debate and problems we have here? University Of Canterbury Professor: China,on Covid-19
Everyone must read this:

As we typed each other during this lock down: Fear No More Landlords, Banks - your income shall be steadied by any govt at the helm, the past 30 years NZ has been intensified in F.I.RE economy which means? if you're part of 'RE' then the overall tax payers shall lift the burden for you; QEs, print money, borrowing/loan, subsidy, mortgage holiday etc. - For How Long? - until the 'Overseas easy credit tap' being opened again, specially from our/NZ economic savior... CCP funding. - We need bluey team at the helm, as NZ will compete fiercely against OZ, Canada, UK, US etc. for this.