Coronavirus: Experts fear for Melbourne’s famed hospitality industry

Melbourne’s world-class hospitality industry could take another huge hit when coronavirus rent relief packages expire later in the year.

Industry experts have serious doubts that commercial tenants in hard-pressed industries would be able to pay back debts accrued during COVID-19.

CRE Brokers agent Lloyd Nunn says a “conservative estimate” was that 50% of hospitality venues would fail within three months of reopening after restrictions are lifted.

He adds many commercial landlords are demanding deferred rent be repaid over two years, which will be difficult for many tenants to achieve.

It comes after the state government urged landlords to negotiate payment plans for tenants experiencing financial hardship related to the pandemic.

“No landlord in their right mind is going to give a waiver if they can do a deferral,” Nunn says. “When the restrictions are lifted, every landlord and his dog is going to say, ‘you pay up or we lock you out’.”

“As soon as the eviction (moratorium) is lifted, you’ll see evictions happening everywhere. We’re putting off the inevitable.”

The Gasometer Hotel at 484 Smith St, Collingwood.

Nunn also says property managers who rely on rental income will put pressure their landlords not to waive rent.

A Fitzroy hospitality tenant says the government’s commercial rent relief scheme is not doing enough for tenants operating hospitality venues.

“The 50% off (of rent payments) doesn’t cut it in cases where you’ve 100% shut the business,” he says.

“It’s going to be a lottery of who has a nice landlord and who doesn’t.”

The publican says landlords and tenants should be in continual discussions about rent payments once restrictions ease.

“At the moment all (my landlord) is saying is ‘we’ll stick to the code – 50%’; that doesn’t work for me. I suspect coming out of this, it’s going to be a slow start.”

“I tried to explain that but they just can’t see the wood for the trees. It’s bananas, rent at the moment is $90,000 (a year), the only reason they will get someone in is they’ll be throwing it at people.”

“What’ll happen is I’ll leave, it’ll sit here for six months – they’ll shoot themselves in the foot.”

A quiet Melbourne city skyline during the COVID-19 pandemic, pictured on what would normally be a busy Friday night. Picture: Mark Stewart

Collings Northcote head property manager Caleb Pikoulas says retail and hospitality will be the hardest hit industries.

“I think it was already bad enough and it’s just going to get worse unfortunately,” Pikoulas says.

He said about 80% of commercial properties have been given rent reductions at his agency, with most deals spanning six months to October.

“Landlords obviously had no decision on whether they would reduce the rent or not, because finding a tenant is virtually impossible right now,” Pikoulas says.

“You have a tenant who is paying something minimal for a couple of months — it’s better than having no tenant.”

Victorian Small Business Commissioner Judy O’Connell says the agency wants landlords and tenants to “emerge from this pandemic in a position where they can rebound quickly”.

“We’re confident the reforms to commercial tenancy laws will give tenants and their landlords the support and security they need during these incredibly tough times,” O’Connell says.

The VSBC is providing free mediation services for tenants and landlords that have failed to resolve rent relief negotiations.

This article from The Herald Sun originally appeared as “Coronavirus: Fears for Melbourne’s world-class hospitality industry”.