This page is designed to provide members with the latest update on the unfolding COVID-19 situation. As you are aware, this is an unprecedented time, with announcements and updates changing daily if not hourly. Content will be updated as the situation evolves.
Industry leadership is crucial in a crisis
The pandemic has pushed us into an unknown and uncertain future. As the crisis unfolds, the need for the property industry to have a united voice will be vital. Property Council's team of policy advisors, regional managers and advocacy experts are working hard to ensure your voice is heard by local and central government, but now more than ever, we need your support.
Membership subscriptions are critical to the survival of our not-for-profit organisation. Especially as we have lost half our revenue, usually generated by live events. If you can, we ask that you please ensure prompt payment of your membership invoice so we can continue to champion cities where communities thrive.
If you'd like to help but are not a member, please contact Harry Wright or click here for further information.
11 May 2020
Galloping towards Alert Level 2
For the first time since lockdown, the end is in sight.
If you’re anything like me, you will be chomping at the bit to get back into the office and return to some semblance of normality.
While there has been much discussion on the pandemic fast-tracking flexible working arrangements, there have also been those who pointed out how much they’ve missed the office environment and how excited they are to be back interacting with colleagues face-to-face.
Yes, things will change, social distancing will need to be maintained, protocols put in place and possibly more space required in order to adhere to the Government’s distancing recommendations. Much of this remains to be seen – the truth is we will only know once we make the move.
Today, the Government confirmed that we will transition to Alert Level 2 at 11:59pm on Wednesday 13 May. Malls, cafes and restaurants will re-open from Thursday, as will offices and public spaces while schools resume next Monday. Life will (almost) return to normal, albeit a "new normal" where gatherings are capped at ten people.
They also released guidelines to assist those returning to work, which can be found here.
Government intervention in commercial leases
The hot topic last week was an indication from the Government that they were considering measures to intervene with commercial lease agreements to prevent poor behaviour from landlords and tenants.
Our reaction to this was swift and effective, and early indications are that this proposal to override the sanctity of commercial contracts has been stopped. Our estimates and surveys indicate that approximately 80% of rent issues have been resolved. We now all need to focus on re-opening the economy and getting things moving. Any legislation change at this point would simply re-open all the good work done and be massively counter-productive. While we are hesitant to say such action is completely off the table, for the time being it seems we can all breathe a little easier and continue to progress tenant/landlord negotiations in good faith.
Here’s just a sample of last week’s media activities:
- 7 May: Retail property owners to develop 'best practice' standards for alert level 2
- 5 May: Industry survey reveals majority of landlords have offered tenants rental support
- 4 May: Market confidence will dictate future development projects
- 4 May: Fast-track consent necessary for Covid-19 recovery
Presentation to the Epidemic Response Committee
Late on Friday afternoon, Property Council chief executive Leonie Freeman and New Zealand Council of Retail Property chair Campbell Barbour presented to the Epidemic Response Committee in relation to the COVID-19 Response (Further Management Measures) Amendment Bill. In addition, we used this platform to advocate against government intervention in commercial leases and a proposed Code of Conduct. You are welcome read a full transcript of this presentation or watch the recording here.
Overseas Investment Amendment Bill could be expedited
The Overseas Investment Amendment Bill was introduced to Parliament on 20 March 2020. The Bill aims to ensure that risks posed by foreign investment can be managed effectively while better supporting productive overseas investment by reducing the regulatory burden of the screening process.
The Bill is a significant improvement over the current law (e.g. simplification of the assessment process, no screening for low risk transactions etc.), and is long overdue. However, we are concerned that the Government is considering fast-tracking under urgency sections of the Bill, as part of the Government’s economic recovery response to COVID-19. We are concerned that it would restrict the opportunity for Parliamentary scrutiny and could remove the opportunity for public submissions.
Given the above, we have sent two letters to David Parker expressing our concerns regarding possible changes to the Bill and the overarching direction the Government is planning to take in that regard. We have also provided an initial list of recommendations which we will expand on in our future submission as part of the formal consultation process.
Guideline for shopping centre operations
Currently, the New Zealand Council of Retail Property are creating an industry guideline for safe operations under Level 2. This guideline will be confirmed in the coming days, with NZCoRP members looking to implement these in their centres this week in preparation for opening as we transition to Alert Level 2.
To view the recordings of our recent webinars, please click here.
Thank you to all those who have engaged with us of late, those who have joined us in webinars and made contact with our team. Your feedback and insight is invaluable and we appreciate your response.
11 May 2020
COVID 19: Rapidly mobilising construction projects
The Construction Sector Accord today issued new guidance to local and central government agencies on getting construction projects up and running quickly following the COVID-19 disruption. One of the focus areas for the COVID-19 Response Plan is to rapidly mobilise projects to support jobs and businesses in the sector, and boost New Zealand’s economic recovery.
30 April 2020
Bell Gully: What could the latest proposed changes to the Property Law Act mean for landlords and tenants?
Author: Bell Gully
The government announced yesterday that it is considering making changes to the Property Law Act 2007 in order to assist New Zealand businesses with rent payments.
It appears that the changes will mean that owners will be required to consider rent concessions for smaller businesses where COVID-19 has had a material impact on turnover. It also appears that the arrangements may be similar (at least in part) to those in the “Code of Conduct for Commercial Tenancies" produced by the Australian government and to be implemented in each Australian state and territory.
The Australian Code imposes mandatory good faith leasing principles for commercial leases where the tenant has an annual turnover of no more than AU$50 million. A rent reduction must be offered based on the tenant's decline in turnover during the COVID-19 pandemic period and the subsequent “reasonable recovery period". The reduction can be a mixture of waiver and deferral arrangements, but at least 50 per cent (and sometimes more) of the reduction must be a waiver. There are also restrictions on the landlord terminating the lease, implementing a rent review or drawing on the tenant's lease security during that same period.
If a similar Code of Conduct is enacted in New Zealand the key question will be whether it will apply retrospectively, as many landlords and tenants have already negotiated rent arrangements to apply during some or all of the lockdown period. These negotiated arrangements might be more favourable to one party than those specified in the Code of Conduct. In addition many New Zealand leases (unlike Australian leases) contain a “non-access clause", allowing the tenant to pay a reduced rent during some of the lockdown period. Will the Code of Conduct override those contractual provisions?
19 May 2020
Kāinga Ora updates
Kāinga Ora has for the last month sent weekly bulletins, outlining their COVID-19 response, to around 500 external build, supply and development partners. The latest two bulletins are below:
- Development and Construction Matters - 15 May 2020
- Development and Construction Matters - 1 May 2020
- Development and Construction Matters - 24 April 2020
2 May 2020
Poor form from business associations
Late last week we were made aware of two open letters sent by the Hospitality Association, EMA, Auckland Chamber of Commerce, BusinessNZ (which includes the Canterbury Employers’ Chamber of Commerce, Business Central and Employer Otago Southland), the Franchise Association of NZ, RetailNZ, the Baking Industry Association and the Restaurant Association, which called for a mandated Code of Conduct for Commercial Leasing.
The letters (available here) effectively pitted one sector against another, providing inflammatory comments that lacked context. Of particular disappointment was the fact that we have enjoyed partnerships with many of these associations in the past, with a significant number of our members also paying membership fees to these entities. By releasing these open letters, these organisations have forsaken one part of their membership for the other, louder voice.
As ‘the voice of business’ they seem to have forgotten that property owners are businesses too.
In response to this, we fired off a media release and wrote to BusinessNZ, EMA, RetailNZ and Auckland Chamber to express our disappointment at their lack of consultation. We have also written to the Prime Minister to provide a counter argument to the letter and redirect her attention to our original proposal, which would have seen both tenants and landlords offered support.
The truth is, this last-ditch attempt to encourage Government action is unlikely to have much effect as landlords and tenants have already started, and often completed, negotiations.
The only thing this group have achieved is to ensure we consider our partners very carefully in future.
Local Government increase in debt could fund COVID-19 recovery
Recently, we wrote to the Minister of Local Government Hon Nanaia Mahuta sharing our concern that local government needs to take on more debt, but in many cases are close to reaching their debt limits. We urged the Government to consider raising debt levels for local government. This would ensure debt could be used for capital expenditure so that key infrastructure projects continue to progress in order to maintain the workforce that is needed in the long-term.
The Ministers response was positive, acknowledging that increased council debt could be a key feature of the recovery. Furthermore, the Minister’s letter confirmed that Local Government Funding Agency and relevant government agencies are actively considering the opportunities and issues around local government debt.
Property Council is supportive of this work. At this time of uncertainty, we must balance the requirement for councils to exercise fiscal responsibility with the need to continue to invest in key infrastructure projects. This message is being reiterated to councils across the country not only through individual letters sent earlier this month, but also in our Annual Plan 2020/21 submissions.
Insurance in the time of COVID
A number of members have raised issues around making claim if a defect occurs during the lockdown if they are unable to access buildings and do an inspection, particularly if they are yet to notify their insurer that the premise is empty. We asked the Insurance Council to advise whether such a claim would be linked to the pandemic and therefore not covered, or if this had been considered and amended.
Their response was:
- Insurers are extending flexibility around lockdown circumstances to their insureds – read more here.
- Insureds should inform their insurer if the property is unoccupied, however, insurers generally understand that many properties are unoccupied during level 4.
- If accidental damage occurs during the lockdown it should be covered. Insurers are not looking to wriggle out of claims.
- The pandemic is not an exclusion for damage to property from unforeseen and sudden events.
- Insurers would expect normal building security patrols that operated normally before the lock down to continue during level 4 and 3. The security industry is an essential service.
- If insurers have any concerns, they will contact the property owner customer via their broker.
- If you have any questions about insurance coverage with your building being now unoccupied due to COVID -19 or about not being able to undertake routine maintenance and inspections due to the COVID-19 restrictions, then contact your insurance adviser/broker or insurer.
The following may help understand the insurers positions:
- Normally, if the property is unoccupied for a specific period of time (often this period can be 30 to 60 days depending on the insurance policy contract), then policy conditions and policy coverage can change.
- Insurers know that the COVID-19 rules take precedence and many properties will be unoccupied during the various mandatory alert levels. Insurers would not look to invoke unoccupancy policy conditions (restricted coverage) for the current alert levels, and they also understand that routine maintenance and inspections cannot be undertaken. Insurers would not look to restrict cover due to that routine maintenance and inspections not being able to be undertaken because of the current COVID-19 alert levels.
- The Insurance Council recommends as soon as COVID-19 restrictions are lifted, then building maintenance and inspections need to resume as soon as possible. Contact your insurance adviser/broker or insurer if you have any questions.
The Insurance Council recently published a Q&A for landlords that is also worth a read.
17 April 2020
Our proposals to Government
Far and away the number one question we have been asked of late has been "what did Property Council propose to government in terms of a rent subsidy".
Prior to this week's announcements we have been cautious with our sharing of this document, but today the embargo lifts and we explore what opportunities the Government missed.
In addition to the rent subsidy proposal, our dedicated New Zealand Council of Retail Property (NZCoRP) Committee also spent considerable time drafting a proposal for the safe operation of shopping centres at Alert Level 3.
While it is disappointing to see such incredible, logical and thorough work not result in a positive outcome, it has also been hugely rewarding to watch the working groups and committees in action as we came together to educate the Government on the far-reaching impacts of their decisions.
As the Property Council, we want to extend our gratitude to these companies and individuals and to all those who emailed, called and fed into our submissions in some form.
21 April 2020
Construction sector COVID-19 health and safety standards and protocols released
Property Council, through the Construction Accord and in collaboration with a range of cross-industry groups, has been working hard to develop and produce a set of protocols that will help keep people safe from COVID-19 when they head back out on site after the lockdown.
These protocols have been designed to provide information to construction businesses on how they can achieve the requirements of the minimum standard for safe operation.
With a new alert level comes new requirements for site work. Construction Health and Safety NZ (CHASNZ) has released level 2 guidance for the building and construction industry. Requirements remain similar to level 3, with physical distancing on site reducing to 1m. Well done to Chris Alderson and the team at CHASNZ for developing these standards to get the construction industry back on the tools safely and at speed.
21 April 2020
Many of our members have been asking what the specific protocols are for opening an office or industrial building, with guidelines for whether or not you should be opening or operating remotely. You can find further information at:
> Workplace operations at COVID-19 alert levels
> The COVID-19 website
> COVID-19: Building and construction sector guidance
> Guidance on prepartory work allowed onsite and for businesses that are preparing to operate under level 3
> AIG Industry Plans for Operating at Level 3
> EMA's FAQ's for businesses impacted by COVID-19
19 April 2020
DIA report on the impact of COVID 19 on local government
As noted in the Treasury economic scenarios report released on 14 April 2020, the COVID-19 pandemic is a rare event that will have profound impacts on economic and financial systems globally and in New Zealand. The local government sector is not immune to such impacts.
The purpose of this initial financial analysis is to inform the ongoing central and local government response to the pandemic and to contribute to early thinking about the development of recovery plans at national, regional and local levels.
5 April 2020
COVID-19 - Response plan for the construction sector
CONSTRUCTION SECTOR ACCORD
The construction sector will have an important role to play in kick-starting the New Zealand economy when COVID-19 Level 4 restrictions are lifted. To support this, the Construction Sector Accord has temporarily shifted focus from industry transformation to industry resilience and recovery. The Accord is a collaboration between construction sector leaders from across government and industry.
The Accord Steering Group has been asked by government to act as an adviser to Minsters on how the industry can best be supported and confidence maintained during and after the COVID-19 disruption. The construction industry now faces many new challenges including a lack of cashflow, workforce retention and additional pipeline uncertainty.
The group has responded with urgency, meeting twice weekly, and additional sector leaders have been bought into the group to broaden the perspective and ensure greater sector coverage. The sector is diverse and complex, and Ministers have emphasised ‘all parts of the industry matter’. It is imperative the full supply chain is ready to quickly restart on an accelerated work programme once restrictions are lifted.
The Accord Steering Group is focused on how the government can support the construction sector and ensure resilience for the benefit of the industry, its workers and the whole economy. This response plan will continue to evolve and be reshaped as issues become clearer and as it is discussed with the sector and Accord Ministers. Specific actions and achievements will be shared with the sector as they are agreed with government.
While the response plan is largely focused on government actions and its leadership by example, it places similar expectations on the private sector that it will act likewise where possible.
The plan has been divided into three response phases:
- Phase 1: maintain – retain a viable sector during the shutdown
- Phase 2: restart – ensure readiness to restart works and accelerate projects
- Phase 3: transform – refocus on high performance
Actions across the phases are focused on:
- Maintaining and accelerating the pipeline of work and removing barriers to restarting works
- Keeping cash flowing in the sector
- Ensuring a fair and consistent approach to how contractor costs are covered and/or reimbursed during the shutdown
- Additional financial and other support that could be available for employees and business owners
- New health and safety guidelines to ensure the safe return to work
Government contract guidelines to support industry
Government has implemented the first action from the Accord’s Construction Sector Response Plan and issued guidance and expectations to agencies on managing contracts during the shutdown.
The government recognises agencies working with the construction industry have a strong part to play in ensuring the industry remains viable and can bounce back after COVID-19 restrictions are lifted.
Ministers are directing agencies within their portfolios to follow new guidelines that will ensure cash keeps flowing in the sector to maintain businesses and jobs during the shutdown. The directive is being sent to the chief executives of all agencies engaged in construction and infrastructure projects including ministries, state-owned enterprises, district health boards and tertiary education institutions.
The construction industry is particularly vulnerable at this time due to its dependence on global supply chains and heavy reliance on cash-flow.
The guidance, which was developed by Accord Steering Group members and is supported by Building and Construction Minister Jenny Salesa, focuses on creating a consistent and supportive approach to contracts.
Those who are the designated business administrator for their member company will have recently received an invoice for renewal of your Property Council membership for the 2020/2021 year. We appreciate that this is a difficult time for businesses and expect many members will be evaluating every invoice that crosses their desk. These are the times that membership associations are made for.
Without your support we would not have a seat at the table with Ministers and officials, nor would we have a mandate to speak on behalf of the industry. We call on members to continue to support us at this time and trust that we are doing everything possible to minimise costs whist maintaining services and increasing our advocacy.
Please feel free to drop our Membership Manager Harry Wright a line if you have any questions or queries.
COVID-19 and the New Zealand Construction Market
Barnes Beagley Doherr have released a brief paper based on their collective insights and market feedback straight from the “horse’s mouth” of the impact of COVID-19 and the lockdown to the NZ construction market.
Where does your council stand on a rates freeze?
Councils across the country are scheduled to increase rates by as much as 10% in the coming months, despite the hardships faced by households and businesses in the wake of the COVID-19 lockdown. Property Council wrote to all council's last week calling for reconsideration of increases and requesting that any increase be kept to an inflationary level. Some councils have already responded, with the Bay of Plenty and Hawkes' Bay Regional Council's both making announcements.
The Taypayers' Union have published a live dashboard for the public to find out where their local and regional council stands on rates freezes.
Rent payments during lockdown
Jane Holland of Bell Gully gives an overview of the potential impact for landlords and tenants over the lockdown period.
> Click here to read more
Fair proportion of rent and outgoings
There is no set formula for determining what is a ‘fair proportion of rent and outgoings’ and the landlord and tenant will need to try to negotiate and agree on this. The ADLS Lease requires that the parties first endeavour to resolve any dispute or difference by agreement and, if they agree, by mediation. If they can’t resolve it by agreement or mediation, then the matter may be resolved by arbitration. There is no precedent for this situation, as such the matter may only be truly clarified once cases are tested.
As a membership organisation, we cannot endorse any one tool or suggest what might be “fair”, this must be negotiated on a case-by-case basis, ideally with legal input. Some of our members from the legal profession have provided rough guidance, but as mentioned, this is not going to fit all situations and should not be taken as individual legal advice:
Commercial real estate values, as a crisis unfolds
PwC have today released a discussion paper on property valuation fundamentals in the context of COVID-19 and kindly made this available to our members.
The paper discusses the two key drivers of commercial real estate that are under pressure; net operating cashflows and investment sentiment / market liquidity.
At times like these, getting accurate information and support can prove daunting. It is with this in mind that we have launched a Property Council Members Group on LinkedIn to connect members with the help they need. If you have a question you would like answered or a service you need support in, please post it in the group for moderation and publication.
This is a time for collaboration and unity - the expertise of our membership is unrivaled and we encourage you to contribute to the discussion in a constructive and helpful manner.
Tell us what you need
The Member and Commercial Services team are currently reviewing our final software options for webinars and we hope to have these up and running in a matter of weeks. In the meantime, we invite you to let us know what you'd like to hear about. We recognise that there's a lot of content out there at the moment and want to know:
- What information or advice do you need that you're not getting elsewhere?
- How can we support you and your business at this time?
- What are the topics of vital importance to inform the business decisions that need to be made in the coming weeks and months?
- 11 May: Galloping towards Alert Level 2
- 7 May: Retail property owners to develop 'best practice' standards for alert level 2 (media release)
- 5 May: Industry survey reveals majority of landlords have offered tenants rental support (media release)
- 4 May: Market confidence will dictate future development projects (media release)
- 4 May: Fast-track consent necessary for Covid-19 recovery (media release)
- 2 May: Intervention in commercial leases not the answer (member alert)
- 28 April: The good, the bad and the ugly (member alert)
- 24 April: The horse has bolted for commercial leasing code of conduct (media release)
- 24 April: Shopping centre industry prepares for ‘click and collect’ operations (media release)
- 24 April: The dawn of a brand new era (for now) (member alert)
- 17 April: If the plan doesn't work, change the plan, not the goal (member alert)
- 16 April: Expanding the bubble (member alert)
- 15 April: The only way out is through (member alert)
- 15 April: Further support critical to continued investment in the property sector (media release)
- 8 April: Patience is a virtue, but progress is a necessity (member alert)
- 31 March: We are your direct line to government (member alert)
- 27 March: What does the lockdown mean for tenants and property owners? (member alert)
- 27 March: Commercial landlords call for support to keep the economy moving (media release)
- 25 March: Council fiscal responsibility needs to be balanced by prudent spending (media release)
- 24 March: Shopping centre industry prepares for Alert Level 4 (media release)
- 24 March: What does an Alert Level 3 and 4 mean for property? (member alert)
- 18 March: COVID-19 economic support package welcomed by the property sector (media release)
- 18 March: COVID-19 economic support package: what's in it for the property sector? (news story)
- 17 March: Property Council's response to COVID-19 (member alert)