Businesses, let’s talk about “post-crisis” leasing...
We’ve covered the Covid-19 crisis in depth, both here at Tenavox and through our partner, Otso. It’s no secret that the shutdown initiated by local authorities has severely impacted most local businesses. It’s unprecedented that we have asked Americans and businesses to stay home and flat-out not work...the effects on the economy, and more importantly, local businesses have been staggering.
Doom and gloom articles are a dime a dozen right now, so we thought it would be helpful to focus on what businesses can do right now to focus on the “what’s next” for their leases as we all start to climb out of this crisis. Tenavox is dedicated to helping businesses and commercial real estate stakeholders find, connect and ultimately occupy spaces more effectively. Even in a crisis, that mission has not changed,
So what can be done with your lease? Well, we have several suggestions we believe are in the spirit of moving forward, together. Let’s stay positive and lean into the “after” shutdown phase of this crisis. We’ve broken this down into several scenarios, please contact us if you have any specific questions. Our team is ready and willing to help in any way we can :)
What if I was about to sign a lease?
We need you! Right now though, you should wait. We’re very likely to see a reset in the commercial real estate leasing markets, literally everywhere. This means, Landlord-friendly markets are likely to get less so, providing opportunities for Tenants in the form of increased sublease space as companies re-evaluate their space needs and existing space needs. Downward pressure on direct rental rates is a likely side effect of increased vacancy rates, but this takes time. If you can wait, 3-6 months (or more) do it. You will probably make a better lease deal for yourself as Landlords start to compete.
What if the market was already “Tenant-friendly” (like the Houston market)?
For tenants and prospects it’s only going to get better. Houston has additional downward pressure (current crisis aside) from oil pricing so we expect a GLUT of sublease space to come available both in office and retail markets. It will be an opportunity for those looking to find second-generation spaces they can capture at below market rates. Direct Landlords will need to get extremely competitive as they are likely to see vacancy rates top 30% in the office markets and cross 20%+ in retail.
I have a lease? What can be done?
We have some great strategies outlined in a separate post by our friends at Otso, but here are the quick hits.
- Communicate with your Landlord. Let them know your current situation.
- If the crisis has affected you, be prepared to show how. Gather financial information and sales reports.
- Consider “blend and extend” strategies. Landlords are often hamstrung by existing leases once they are signed. Amending that lease (extending the term 90 days and getting 2-3 months of free rent) is a clever way to get up front value while not taking anything “away” from the Landlord in terms of rent due over the term.
- If you’re unable to return to your lease situation, call an attorney. You’ll need to think through this with a legal advisor. Breaking a lease is serious, but so is this situation. Weigh it carefully.
What resources are out there if I’m considering signing a lease or trying to amend my current agreement?
Get your lease deposit cash back with Otso. Visit this link to learn how to get up to $50,000 in lease deposits back, per lease. Doing a new deal? Otso can make it so the deposit is never even required.
Cash is best in the hands of businesses (especially now). Otso provides landlords with the comfort and strength of collateral they need while providing Tenants with better liquidity.
If you’re considering legal strategies visit these legal resources to learn more about how to consider lease provisions given the current crisis. Fair warning, this will require an attorney and likely will be a contentious process with your Landlord. We’re for more practical solutions that can help stem the tide but understand every business is in a different position.