Leasing

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The Commonwealth Government has published a set of good faith leasing principles for commercial tenancies including retail, office and industrial.
It is to operate between owners/operators/other landlords and tenants, in circumstances where the tenant is a small-medium sized business is an eligible business for the purpose of the Commonwealth Government’s JobKeeper programme, i.e. seen a 30 percent fall in its turnover.
The national cabinet agreed that there would be a proportionality to rent reductions based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants.
The Code provides a proportionate and measured burden share between the two parties while still allowing tenants and landlords to agree to tailored, bespoke and appropriate temporary arrangements that take account of their particular circumstances.
National Cabinet again noted that it expects Australian and foreign banks along with other financial institutions operating in Australia, to support landlords and tenants with appropriate flexibility as they work to implement the mandatory code.
The Commonwealth Government is also acting as a model landlord by waiving rents for all its small and medium enterprises and not-for-profit tenants within its owned and leased property across Australia.
The new leasing code is mandatory.
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But all premises are different, as are their commercial arrangements; it is therefore not possible to form a collective industry position. All parties recognise the intended application, legal constraints and spirit of the Competition and Consumer Act 2010.
The parties will take into account the fact that the risk of default on commercial leases is ultimately (and already) borne by the landlord. 
The landlord must not seek to permanently mitigate this risk in negotiating temporary arrangements envisaged under the code.
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All leases must be dealt with on a case-by-case basis, considering factors such as whether the SME tenant has suffered financial hardship due to the COVID-19 pandemic; whether the tenant’s lease has expiredor is soon to expire; and whether the tenant is in administration or receivership.
Leases have different structures, different periods of tenure, and different mechanisms for determining rent. 
Leases may already be inarrears. Leases may already have expired and be in “hold-over.” 
These factors should also be taken into account in formulating any temporary arrangements in line with the code.
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1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period).
2. Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code.
3. Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined under “definitions,” below) of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.
4. Rental waivers must constitute no less than 50% of the total reduction in rent payable under principle #3 above over the COVID-19 pandemic period and should constitute a greater proportion of the total reduction in rent payablein cases where failure to do so would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease agreement. Regard must also behad to the Landlord’s financial ability to provide such additional waivers.Tenants may waive the requirement for a 50% minimum waiver by agreement.
5. Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties.
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6. Any reduction in statutory charges (e.g. land tax, council rates) or insurance will be passed on to the tenant in the appropriate proportion applicable under the terms of the lease.
7. Landlords must not draw on a tenant’s security for the non-payment of rent (be this a cash bond, bank guarantee or personal guarantee) during the period of the COVID-19 pandemic and/or a reasonable subsequent recovery period.
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8. The tenant should be provided with an opportunity to extend its lease for an equivalent period of the rent waiver and/or deferral period outlined in item #2 above. This is intended to provide the tenant additional time to trade, on existing lease terms, during the recovery period after the COVID-19 pandemic concludes.
9. Landlords agree to a freeze on rent increases (except for retail leases based on turnover rent) for the duration of the COVID-19 pandemic and a reasonable subsequent recovery period, notwithstanding any arrangements between the landlord and the tenant.
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Where landlords and tenants cannot reach agreement on leasing arrangements (as a direct result of the COVID-19 pandemic), the matter should be referred and subjected (by either party) to applicable state or territory retail/commercial leasing dispute resolution processes for binding mediation, including Small Business Commissioners/Champions/Ombudsmen where applicable.
The national cabinet offered a scenario examples of practical variations reflecting the application of the principle of proportionality may include, but are not limited to:
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 Qualifying tenants would be provided with cash flow relief in proportion to the loss of turnover they have experienced from the COVID-19 crisis ie. a 60% loss in turnover would result in a guaranteed 60% cashflow relief.
o At a minimum, half is provided as rent free/rent waiver for the proportion of which the qualifying tenant’s revenue has fallen.o Up to half could be through a deferral of rent, with this to be recouped over at least 24 months in a manner that is negotiated by the parties
  So if the tenant’s revenue has fallen by 100%, then at least50% of total cash flow relief is rent free/rent waiver and the remainder is a rent deferral. If the qualifying tenant’s revenue has fallen by 30%, then at least 15% of total cash flow relief is rent free/rent waiver and the remainder is rent deferral.
  Care should be taken to ensure that any repayment of the deferred rent does not compromise the ability of the affected SME tenant to recover from the crisis. 
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How the new leasing code works for Australian retail/office/industrial tenants

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Lifestyle clothing brand Mister Zimi has taken a lease of an office and warehouse facility at Prahran in Melbourne’s inner east.
Teska Carson’s Jack Kelliher, who brokered the 3-7 Walker Street deal, with Luke Bisset, said the two level, 880 square metre, premises was let at $160,000 per annum net.
It was on a five year term with a five year option.
He said the property offered a very flexible premises in a sought after inner city location.
"This was a great opportunity to secure a unique and very functional property in a prime location just off Chapel Street in the heart of Prahran and within walking distance of public transport and a range of lifestyle amenities,’’ Mr Kelliher said.
He said the tenant was attracted to the utility and adaptability of the two level space in a location which offered accessibility and close proximity to all necessary services and amenities as well as clients and staff.
The lessor is a Melbourne based private investor. 
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Mister Zimi clothing brand takes Prahran lease

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Real estate investment manager Cromwell Property Group has seen increased demand at its Mary Street commercial tower.
Cromwell has signed more than 13 new leasing deals at its Mary Street asset, predominantly with ASX-listed professional services companies.
The office tower is now close to 90% occupancy with the new tenants joining long-standing occupants Arthur J Gallagher, Australian Associated Press, and Retire Australia is growing financial services firm IOOF, AGL, Computershare, and engineering consultants Northrop.
The 20-level office tower, located at 200 Mary Street, is in the heart of Brisbane’s Golden Triangle.
Bobby Binning, Cromwell Head of Property, said the recent deals highlighted the increasing popularity of sub-500 square metre space in the Central Business District
“Demand has increased in the past few years, particularly from companies looking for creatively designed fitted tenancies of high quality to cater for the growing needs of these professional services firms,” Binning said.
“Mary Street is an attractive building for variety of firms as it offers flexibility, as well as quality management to meet the changing needs of our tenants and their employees.”
Cromwell purchased the Mary Street asset in 2001 and has since undergone extensive modernisation and refurbishment.
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Cromwell nears full occupancy at Mary Street, Brisbane building

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Mirvac Group has secured three new tenants at its A-grade office building at 90 Collins Street, Melbourne.
They take the building to 100 per cent leased. 
Click Energy has leased over 1,300 square metres for a five-year term.
An eight-year term has been secured with Merricks Capital for approximately 500 square metres.
A five-year term has been secured with McDonald Murholme for over 900 square metres. 
Mirvac’s Paul Bezzina said the building offers 21,000 square metres workspace over 21 levels along with luxury brand retailers on the ground floor and basement parking for 111 cars.
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Mirvac's 90 Collins Street, Melbourne fully leased

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An office space in Sydney CBD's western precinct is up for lease through Savills.
The 22-storey office building at <a href="https://commercialpropertysearch.savills.com.au/cb67fd44-51c7-e611-80c4-005056816dfc/Lease/Sydney/55-Clarence-Street" target="_blank">55 Clarence Street</a> has undergone refurbishment including a facade refresh. 
Each floor enjoys natural light on three sides and views of Darling Harbour, Pyrmont, and the city, according to the property’s description. The building has a 5-star NABERS rating for energy efficiency.
On offer is part Level 15 which is on sub-lease to June 30, 2018. It is being offered at $475 sqm gross effective.
Features included fitted part floor with a boardroom, meeting room, offices, workstations and kitchen/breakout area.
The property has good exposure, being on the corner of Kent, Margaret and Clarence streets in the western precinct of the Sydney CBD.
Chris Rowe of Savills is the leasing agent.
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Short-term lease offer in prime location in Sydney's CBD: Savills 

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Titan Recruitment has leased office space at London House in the Perth CBD.
Located at 216 St Georges Terrace, the 315 square metre office was leased with a turnkey fit out delivered by the lessor, WA property group Hawaiian.
The space comprises high quality sit/stand electric workstations, new staff breakout areas, reception and several interview/meeting rooms.
CBRE’s Lachlan Lewis negotiated the six-year lease for a commencing net rental in the range of $515 per square metre.
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London House flexes its strengths to attract Titan tenant

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Exchange Tower has bucked the market trend with its leasing activity in Perth's challenging office market.
The vacancy in the building has dropped below 15%, an improvement from the rate of more than 37% earlier this year.
Exchange Tower is a 40-level, premium-grade office tower located just off St Georges Terrace in the heart of the Western Australian capital and in close proximity to Elizabeth Quay and Perth’s major shopping malls.
As part of the ongoing investment in Exchange Tower by joint owners the AMP Capital Wholesale Office Fund (AWOF) and Western Australia-based property investor Primewest, works have commenced for a significant refurbishment of the ground floor lobby with plans underway for upgrades of the forecourt and lifts.
The world’s sixth largest accounting group, RSM, has committed to lease 3,281 square metres of space over three high-rise levels in Exchange Tower and will also take signage rights after negotiating a long- term lease in the building.
RSM’s move is one of four major new deals in Exchange Tower, with international engineering group ARUP, multinational technology company Fujitsu and national law firm Moray and Agnew also relocating to the building.
ARUP is leasing 1,500 square metres of space on level 14, Fujitsu is taking 1,309 square metres on level 9 and Moray and Agnew is leasing 1,092 square metres on level 30.
Other recent new tenants include Quayside Chambers, Viva Energy and WTP. The moves follow a targeted leasing campaign managed by Ian Edwards, Knight Frank.
Exchange Tower is already home to some of Perth’s leading commercial and public institutions including Patersons, Morgan Stanley, Bell Potter, Allen &amp; Overy, Bain, Ministerial &amp; Parliamentary Services, Mitsubishi, Mitsui and Knight Frank.
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Perth’s Exchange Tower secures key leasing deals in tough market

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The Starbucks coffee chain has leased one of the top corner retail locations on Manly Beach.
It has leased the Ocean Beach Tea Rooms at 110 The Corso.
Despite seemingly receiving a lukewarm reception from local residents, Colliers International agents Blake Harey and Scott Smith secured the chain as tenant for a local investor landlord.
The 152 square metre ground floor retail space that features heritage facades has been leased for seven years, with the option to extend.
They did not rent the first floor wraparound balcony, which remains vacant.
Industry sources estimated that the site would fetch an annual rent of more than $3000 per square metre, according to the local paper.
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Starbucks leases at Manly Beach

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An office suite in North Sydney CBD is available for a new tenant paying a gross rent of $280 per week plus GST.
Suite <a href="https://www.rhcommercial.com.au/properties/107-walker-street-north-sydney-2060-new-south-wales" target="_blank">106/107 Walker Street</a> has a floor area of 49 square metres and is minutes from North Sydney train station, banks and other amenities. The suite could prove useful to a small business or startup. 
The fit-out consists of two offices, one meeting room, an open plan area and a kitchen. 
The listing agent is Adam Cardenas of Raine &amp; Horne Commercial.
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Affordable North Sydney office suite up for lease 

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Wittner Shoes has agreed terms on a new lease in Melbourne’s CBD in an off-market deal. 
The 105-square metre retail space is located on the corner of Little Collins Street and Howey Place, well known for haute couture and hip culture.
Wittner Shoes has signed a lease for a five-year term, with options, at a rental of circa $4000 a square metre per annum net.
Savills Australia’s Michael Di Carlo, who brokered the deal with Jock Thomson, said, "Melbourne is Wittner’s town -- it opened its first store here Melbourne in 1912 and now has 75 stores nationally -- and it required space which both reflected its business prominence and of course that offered maximum retail exposure."
The tenancy, previously leased to Maggie T and Oroton, had been combined to provide Wittner more space.
Wittner would begin fitting out the store soon with a view to opening in the next few weeks.
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