New Research Brief: Negotiating with Tenants and Leasing Space During COVID-19

Originally published by Shawn Moura, Ph.D., for NAIOP's Research Foundation in August 2020.

The coronavirus pandemic has had a broad impact on local economies across the U.S. and Canada. Mandatory closures and reduced consumer expenditures have impaired business operations across many industries, making it difficult for some commercial tenants to pay their rent on time and in full. Although less severely affected by the outbreak than hospitality or retail tenants, some office and industrial tenants have asked building owners for assistance in the form of rent abatements or deferrals. A small minority of these tenants have simply refused to pay rent.

Building owners have quickly developed strategies to respond to struggling tenants without jeopardizing their own financial health. At the same time, they have also adapted their leasing strategies to changed market conditions while updating the way they show spaces to facilitate social distancing.

Most North American localities have relaxed the regulations that required widespread business closures in March and April, but concerns are growing that an increase in infection rates may require another round of closures in some parts of the U.S. High rates of unemployment and reduced consumer expenditures may also lead more tenants to seek relief, even when their businesses remain open. Concerns about potential infection from face-to-face contact are also unlikely to disappear in the near future. For these reasons, practices that owners developed in the first months of the pandemic are likely to remain useful until the coronavirus and its economic effects have abated.

This research brief draws from interviews with brokers and building owners, news sources, NAIOP webinars, and NAIOP survey data to identify best practices for triaging office and industrial tenant requests, offering reasonable accommodations to those tenants who need short-term assistance, and responding to uncooperative tenants. The brief also examines how owners are adapting to the ways they show and lease space to new tenant preferences and safety expectations.

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