While many individual renters are struggling to pay their monthly rent during the on-going Coronavirus pandemic, the commercial side of real estate is not much different.
Many commercial tenants requested rent abatements and/or forbearance agreements with accompanying extensions of lease terms.
However, many landlords are worried if they give assistance to certain tenants, it is a risk the ones they help will still be in business after the abatement and/or forbearance periods expire.
Most tenants, businesses, local restaurants, etc. are relying upon the Federal Cares Act, the Paycheck Protection Program, and Employment Retention Credit to help keep their businesses alive.
The fact is that most of the Federal relief money was distributed to larger, well-known restaurant conglomerates instead (i.e., Potbelly Sandwich Shops and Ruth’s Chris Steakhouse) as opposed to the neediest small business owners.
Many “non-essential” retail and commercial tenants closed their doors during “the Pause”, causing their landlords to incur significant losses of revenues.
Some commercial tenants were able to negotiate with their landlords, but there is revenue loss on both sides.
It is clear that the extended quarantine has already affected business going forward, with digital/technology, working remotely, online sales, and re-imagining the future layout of office spaces.
While a significant number of “mom and pop” retail and restaurant establishments closed down, a surprising number of corporate chains are also struggling to make rent.
The next result is that landlords are put in a difficult position because they are still on the hook for their own debt-related responsibilities as well as real estate taxes and utilities.
In New York, landlords and tenants are quickly learning to think outside the box and get more creative in their approach to making ends meet.
Owners are facing a demand in health and safety measures such as employees wearing face masks, the installation of temperature scanning devices, as well as the increase in wearing of gloves.
The once-favored open space layout may or may not change as employees return to their jobs and rethink the idea of occupying a densely populated workspace where sitting more than 6 feet away from someone may not be an option. This may result in the older style of individual offices coming back in style as most people seek to be more self-isolated rather than out in the open with several co-workers.
Furthermore, working remotely may be a trend that is here to stay as many companies to adapt to today’s health and safety requirements. As people continue to work from home, it is very likely that this may be a more permanent trend, especially for those who commute from out of state, such as Connecticut and New Jersey.
Now, more so than ever before, open lines of communication between landlord and tenant have never been more important. If a tenant notices their landlord is more attentive and understanding of their needs during this difficult and unprecedented time, chances are these tenants are going to re-sign with the existing owner.
Transactions that were near closing before the pandemic broke, most likely got signed. However, the real estate industry is at a basic standstill when it comes to upcoming sales. While the world is in an adjustment and transition phase and we are all learning how to adapt to the pandemic still surrounding us, the opportunity to communicate is extremely important more than ever. Meaningful relationships are being forged between landlords, brokers, etc. during these uncertain and challenging times. People should understand there are options available and to keep an open mind.