Business owners in Melbourne CBD call for rent relief extension, warning insolvencies are coming

Business owners in Melbourne’s CBD are calling on the Victorian state government to extend COVID-19 commercial rent relief measures, warning that inaction will lead to a wave of business failures — just as the city starts to reopen.

The Victorian government’s Commercial Tenancy Relief Scheme is due to come to an end in a matter of weeks, on December 31.

That means businesses will be liable to pay 100% of their rents, while also starting to make repayments on the amount they’ve deferred.

In Melbourne’s CBD, where COVID-19 lockdowns were some of the longest and strictest in the country, and where trade has nowhere near returned to normal, the end of the year represents a looming cliff-edge that many won’t survive.

The owner of a co-working space in the city, who did not want to be named, tells SmartCompany their monthly rent is more than $100,000.

The business isn’t bringing in anywhere near that much, and the owner doesn’t expect to next month either.

“For me to have to pay 100% rent in January, plus a portion of the deferred rent, it’s impossible,” they say.

“We’re not getting the income.”

Currently, offices are allowed to reopen to 25% capacity. From January 11, that will increase to 50%.

But the reduced footfall is having an effect. Of all the cafes around the co-working space, “probably 50% have now got ‘for lease’ signs”, the business owner says.

December and January are also traditionally quiet months, anyway, they add. No business is going to magically bounce back on January 1.

“Still very precarious”

Jane Semple, owner of corporate events and catering business Goodie, says with in-person events still largely off the table and very few office meetings to cater, “we don’t have any revenue to regain at this point”.

It feels like the finish line of the COVID-19 crisis is within touching distance. But, she says removing rent relief measures too early would see businesses falling into insolvency at the final hurdle.

“If it’s pulled out from under us too soon, all the good work we’ve done to stay alive is going to be for nothing,” she says.

Semple has a very positive relationship with her own commercial landlord, she says. But, if that wasn’t the case, the removal of the rent relief measures would be the end of her business.

“It’s still very precarious,” she adds.

The government support available to businesses such as Semple’s has been considerable, and very welcome.

And, while Victoria’s lockdown measures were strict, they seem to have worked. The state has now gone 41 days without any new COVID-19 cases, something the business owner is grateful for.

Containing any further outbreaks remains critical, she says.

But now, it’s time “to restore health into the CBD”.

Retail and hospitality activity is picking up in the suburbs. But, in the CBD, a lot of businesses rely on the daily surge of office workers.

The small coffee shops, barbers, dry cleaners, parking lots and even hotels are still suffering, she says.

And she doesn’t believe the state government truly has a handle on the wave of business failures it’s facing.

“I don’t think they understand how bad it is.”

Extend and flex

Both these small business owners want the state government to extend the rent relief scheme.

Semple would like to see measures extended to March, or even June, to give businesses like hers a little longer to recover.

They may look like so-called zombie businesses, being kept afloat artificially. But that’s not the case here, she says.

“It’s not a recession sorting the wheat from the chaff … These are businesses that were going quite well until this extraordinary pandemic.”

Given a little more time for things to return to normal, they will likely thrive again.

The owner of the co-working space also wants to see more flexibility going forward. If the scheme is extended until March and things haven’t improved by then, they want some guarantee the ongoing support will be available for longer still.

“We really just need this extended and extended, until we see a recovery,” they say.

“The alternative is that business owners will just walk away.”

At the time of writing, the Victorian state government has not responded to a request for comment.