How Will Commercial Leasing Be Impacted by the Worldwide Shutdown?

Businesses have begun gradually reopening and will continue to do so over the next couple of weeks. With this in mind, now that most tenants are able to pay rent on time, it is still important to look at the long-term impact that COVID-19 may have had on commercial leasing. Along with the best practices to implement in managing these properties moving forward.

First, the quandary of how some tenants have been unable to pay rent with their business being slowed or halted. Most managers have had to allow some method of rent extensions and fee forgiveness—putting property managers and landlords in a tough spot. This may ultimately prove challenging as it is the ethical option. However, as with most things during the current economic climate, it does not insure long-term safety. It is possible that businesses will be slow to repay debts in a timely manner as they are struggling to recover from the impact of the worldwide shutdown thus leaving property managers and landlords in trouble .

Another important aspect of businesses reopening is ensuring that tenants follow CDC guidelines. Tenants will need to increase their cleaning and disinfecting, especially on hard surfaces. Restaurant and retail spots will need to implement stronger practices like the constant use of masks and gloves and capacity limitations. Hand-sanitizing stations at business entrances is another way to ensure safety. Property managers should also consider requesting that their tenants limit in-person meetings with clients and instead choose video conferencing.

Property managers and brokers should become as flexible as possible because many of their tenants’ and client’s needs will change. While businesses may have preferred to rent upscale or larger areas before, the structure of their company may look different now. Many businesses will allow employees to work from home or employ remote workers from other locations. While it may seem that this will cause disruption in cash influx, you may be able to rent to a greater quantity of locations than before. The coming months will bring a great deal of relocation and adjustment, but not necessarily economic downturn. Property managers will ultimately need to rethink properties. What was once considered less attractive to renters, such as smaller spaces, may now prove extremely lucrative. Not to mention, leases are still expiring, forcing tenants to be on the search for something new—their requirement list now might just look a little different.

In regards to retail and restaurant leasing, this may be a different story. Not only do they have stricter operation requirements like capacity limitations and stronger sanitation efforts, but they have pretty much been shutdown the last ten weeks. Restaurant and retail owners have taken such a hit over the last few months that the last thing on their mind right now is expanding their business or moving to a larger space. Not to say it will stay like this forever, but these owners are focused on keeping themselves afloat being as cautious as possible while waiting to see what the future holds.

Although we are eager to stimulate growth as businesses begin to reopen, it will ultimately prove worthwhile to practice as much patience as possible. Many renters are struggling to get back on their feet and their company and clientele may look different than it did before the worldwide shutdown. Maintaining adaptability and accommodating renters will prove to be the best long-term solution when it comes to producing growth in the CRE industry. It seems as though we are still in murky waters, however it is very possible that new and positive opportunities will arise in the near future.