News broke last week that several large developers were offering support to their retail tenants, to assist them with their overheads during this ‘circuit breaker’ period. This support came in the form of passing on the full property tax rebate, waiving rent payment for one whole month, as well as allowing tenants to utilize their security deposits.
Suntec City is one such mall that is offering this type of support. Suntec is waiving the rent of all its mall tenants, including those essential retailers who are still allowed to operate, for the month April. It will also pass on 100% of the property tax relief to all mall tenants, as well as allowing tenants to use their one-month cash security deposit to offset the rent, as reported recently in Today Online.
City Developments (CDL) also said it would pass on the full amount of money saved from the property tax rebate to its retail tenants. Retail tenants are entitled to a 100% property tax rebate, which in many cases is equivalent to one month’s rent.
The big question is what relief is available for office tenants? This may indeed just be limited to passing on the property tax rebate. It is important to note though that office tenants will only be entitled to a 30% rebate so there is a significant difference. Why? – because it could be argued that businesses can continue operations remotely, whereas shops have no choice but to close. This could seem harsh when tenants are directed not to use their offices, except those with special permission, whilst still having to pay the full monthly rental.
It is still early days to see how the commercial property market will react, but there will be no simple solution. Take Suntec City for instance – a substantial number of the units/floors in office Towers 1 & 2 are owned by private investors, many of whom use the rental income to service their loans.
The ‘knock on’ effect of a loss of income for such private owners is clear. We expect that it will take at least another month or two before any wide scale support plan, if any, can be worked out - but the consequences of this pandemic could be far reaching for a significant time ahead.
For more information, view our latest
Office Market Update