Asking and answering what now? and what’s next? as commercial real estate professionals work to overcome the challenges of today and prepare for the changes of tomorrow
As the impact of the novel coronavirus pandemic has resonated across the nation and the world, untold numbers of lives and businesses have been profoundly altered. From disruption and economic hardship to genuine tragedy, it’s clear that we will forever view the world through a pre-COVID and post-COVID dividing line.
In the commercial real estate industry, brands and businesses have had to make difficult decisions, with operational changes, service limitations and shutdowns rippling across the industry. The speed with which this has all taken place has been stunning. In an extremely short period of time, owners and operators have been challenged to find ways to help their tenants while also protecting their own interests. They have had to make big changes and big decisions now and starting to think about strategic next steps for an uncertain future and eventual reopening.
In this short two-part blog series, we will attempt to answer those questions, focusing first on where things stand today, and what practical steps and best practices commercial real estate professionals should be utilizing right now to help themselves and their tenants navigate the current turbulence. In a subsequent blog entry, we will turn our eyes to the future, zeroing in on the process of planning and preparing for a post-COVID new normal once the economy reopens.
In other words: what now? And what’s next?
“Communicate” might seem like evergreen advice but keeping lines of communication open and active with your tenants is a vital necessity during the current crisis. Be proactive and reach out regularly to share any COVID-related changes with your tenants, disseminate information on executive orders and other health and safety guidance from civic leaders and public health officials. While using tech tools like email, texting and other digital channels is obviously an important and convenient way to stay connected, the personal touch is especially important right now. “Face-to-face” video calls and phone conversations have an impact and immediacy that an impersonal email simply can’t match. Keep those conversations going, reaching out to tenants on a regular basis and ensuring that those efforts don’t start and end at the executive level. It’s important not to neglect your vendors, either. A one-on-one conversation can facilitate the kind of collaborative engagement with a vendor that doesn’t just serve your own interests but could spark ideas and momentum for special programs and/or offers for tenants, as well.
Flexibility is arguably the single most important asset right now for any commercial real estate professional. The process of communicating and coordinating with lenders and vendors and working with tenants to determine what everyone can do (and paying) going forward, is a herculean logistical task. However, just as important a task as the coordination itself is the negotiation process that follows. Many tenants have reached or are living with vastly reduced revenues. Landlords need to be understanding of Tenant’s situation and all parties need to work together to make it through these challenging times. Landlord and tenants may be willing to exchange some reduced or forgiven rent today for a lease extension or trade some reduction today for some repayment when the economy reopens. On the vendor side, coordination and negotiation may secure a result that is beneficial to both sides. For example, some vendors might consider providing free or reduced-rate services in the near-term in exchange for a guaranteed longer-term deal.
Finally, recognize that no two tenants are alike, but they do have one thing in common: they would all benefit from the support and assistance from a true partner during these difficult times. Owners and operators who take a constructive leadership role, working to help provide their tenants with the guidance, resources and information they need to overcome challenging circumstances will find that they benefit, as well. Help your tenants identify government programs and other forms of assistance they may qualify for. Connect those without established banking relationships to a trusted financial partner. Consider hosting information sessions or virtual town hall meetings where experts give presentations, guide discussions, and answer tenant questions. Helping your tenants take it through the weeks and months ahead is an investment that will pay off handsomely in the future.
More on what that future might look like—and what commercial real estate professionals can be doing right now to prepare for it—in the second and final entry in this two-part blog series.