What scenarios can push melbourne CBD rental prices down? (other than oversupply)

[Tim W]

What scenarios can push Melbourne CBD rental prices down? (other than oversupply)

I can't think of any other reasons why rental prices would come down?

First, can we clarify...
are talking about retail, larger commercial and/or office, or residential (many apartments in Melbourne CBD)?

If the former, then much of what @Rob Legat - SBPL said above, I tend to agree with, although I wonder if parking is a thing in a CBD, compared to foot traffic?

One thing I do wonder about (your thoughts on this are welcome, comrade Birch...) is...
for those retailers who calculate return per square metre, in these tight retail times,
is it not in their interest to simply re-negotiate rent down,
so as to maintain that number?

 

[Rob Legat - SBPL]

for those retailers who calculate return per square metre, in these tight retail times,
is it not in their interest to simply re-negotiate rent down,
so as to maintain that number?

It can be more complicated than that. Rental return often directly affects valuation - and valuation affects their lender's LVR. If they're leveraged close to their lender's maximum commercial LVR, a dip in rental price may trigger a reassessment of their lending facilities and a call by the lender to pay down the debt. If they've got a number of properties, this can be a nightmare. I've seen multiple instances of commercial tenancies left vacant for that purpose alone, because the re-evaluations that would be caused are not worth the loss in rent.

 

[Tim W]

It can be more complicated than that. Rental return often directly affects valuation - and valuation affects their lender's LVR. If they're leveraged close to their lender's maximum commercial LVR, a dip in rental price may trigger a reassessment of their lending facilities and a call by the lender to pay down the debt. If they've got a number of properties, this can be a nightmare. I've seen multiple instances of commercial tenancies left vacant for that purpose alone, because the re-evaluations that would be caused are not worth the loss in rent.

Yup.
My question was coming from the tenant side, and your post above, from the landlord side.
How very interesting this is.