In just a few short weeks, the impact of the novel coronavirus pandemic has been not just dramatic, but historic. Lives have been altered and businesses have been profoundly disrupted as the economy shudders with the impact of a pandemic sized pothole in the road.
For commercial real estate professionals, that disruption has been dramatic and virtually immediate, as lockdowns and stay-at-home orders have prompted many brands and businesses to either close or dramatically scale down their operations.
Owners and operators have two critical questions to answer: What now? and What next?
Below is an overview of specific tips and tactics that real estate professionals can use to engage with and assist tenants, protect their own interests, and prepare for not just the immediate future, but a dramatically altered operational landscape that will likely represent the new normal for some to come.
Don’t mandate, facilitate
While no two tenants are alike, one thing that remains consistent across the board is the benefit of reaching out to your tenants to offer support. Now more than ever, owners and operators should be making it a priority to serve as a resource for their tenants—both to listen, and to provide them with any guidance and support they can as they navigate the challenging circumstances. Refer tenants to relevant government programs that may provide financial assistance when you can, or allow deferrals of rent if you are able. Being straightforward with your tenants on whether you can assist financially can go a long way. All parties are losing revenues and having direct communication can make a difference. The simple act of connecting tenants without established banking relationships to a trusted banking partner can be beneficial for all parties involved. Consider hosting virtual seminars or “town halls,” with guest speakers who can give presentations and advice, and answer tenant questions.
Make time for face time
Communicating clearly and consistently with tenants is critically important. Landlords should be doing more than just calling about rent. They should also be proactive about sharing updates about the property and actions being taken to protect the health and safety of tenants. That means sharing executive orders, breaking news, and best practices from public health and safety experts. Something as simple as reaching out to tenants to assess their needs and check on their status is noteworthy. Ironically, it is precisely at a time when personal connection is so limited that we most need to try and have those all-important one-on-one conversations. Whether it’s the phone or through a video conference, face time with tenants is incredibly valuable.
Coordinate and negotiate
More than ever, the life of a real estate professional is about coordination and negotiation. Sorting through the endless calls and emails is a herculean task. Engaging in individual negotiations with each tenant—as well as a number of vendors—is also a vital, but time-consuming process. While most commercial tenants were able to meet their short-term financial obligations, few can sustain that over the course of an extended shutdown/slowdown. Landlord flexibility will be needed when it can be afforded. That flexibility and willingness to restructure leases or defer payments should come with corresponding give on the part of tenants, such as negotiating certain lease terms, extending lease terms when possible, etc. Don’t forget to reach out to vendors, as well. Some may be able to deliver short-term financial relief or reduced-rate services in exchange for a landlord’s willingness to sign up for a guaranteed longer-term deal.
Start the process
While no one knows what a nationwide reopening will look like yet—and the details will vary from one state to the next—there’s no question that landlords and tenants alike will need to make operational changes. They will also need to take new health and safety measures to protect their employees, consumers and guests. From new signage and new spaces, and from providing guidance on ingress and egress expectation and protocols, to changes designed to make social distancing a priority, plans will need to be re-made. Owners, operators, tenants and vendors should begin thinking about how to source and secure things like hand sanitizer and PPE. They should also start clearly stipulating—in writing—who is responsible for various cleanliness and safety measures. Finally, start thinking ahead to the possibility of tenants redesigning certain open areas like conference rooms and dining facilities, and identifying potential vendor partners who might be able to defray the cost of reconfiguring those spaces.
Plan in chunks
One troubling aspect of the pandemic is the uncertainty. When will the first wave end? Will there be a second wave? When will a vaccine become available? From doctors to deli owners, we are all learning as we go. Because there are still so many unknowns, owners and operators should be planning no more than three months ahead. While preliminary planning for upcoming operational changes (like those described above) is wise, any specifics beyond that 90-day horizon are too subject to change.
Unlock new opportunities
Just as restaurants and retailers have had to adapt to look for new customers and new ways to service those customers, commercial real estate professionals should be identifying new ways to add value with their demonstrated expertise.
All for one
When the going gets tough, the tough get…together. No matter how resilient you are as an individual or an organization, there is strength in unity and in working together. Ultimately, the long-term fortunes of landlords, tenants, lenders and vendors are all connected. There is little long-term value in taking an unyielding stance or a rigid hard line. Those who can compromise and find mutually beneficial ways to negotiate the current crisis will emerge stronger in the months and years ahead.
Andy Gutman serves as the president of Southfield, Mich.-based Farbman Group, a leading full-service real estate firm with Midwest expertise and a global reach, handling all facets of real estate transactions, from property management and leasing to acquisition and disposition. For more information, visit www.farbman.com.