Challenges of the coronavirus lockdown for the commercial property sector

  • Author: Andy Hellier
  • Date: 18th May 2020

The COVID-19 lockdown period is an unprecedented situation and has presented many challenges to the commercial property sector and indeed, the entire economy. Businesses, landlords and tenants across all sectors of the property industry are likely to have been affected significantly.

Challenges of the coronavirus lockdown for the commercial property sectorMost non-essential businesses will have had to close their premises or offices and either ceased trading or found ways to work from home. Either way, it is unlikely that they will have been able to be as productive as usual, and depending on the sector, their business is likely to have decreased. Their clients and customers may not have been able to do business themselves or simply not had the capital to spend, especially at such an uncertain time.

These businesses will be facing difficulties and although they may have been able to utilise the government furlough scheme to help with staff salaries in some cases, there are still all the overheads to consider. As tenants, they will still be obligated to pay their rent, maintenance charge and bills, which if you are not trading, is a large amount to find.

As a result of this, some businesses may be looking for ways to restructure or if possible, break their lease. The enforced working from home may have revealed this to be a realistic long-term option going forward and may be something they want to explore. Or, the lack of business they’ve experienced during this time could mean that they are simply unable to afford to continue to lease a building.

Some businesses may be looking to agree a payment plan with their landlords that will allow them to pay back owed rent in the months to come when business will hopefully have picked up and improved.

Landlords who are leasing out their properties to business tenants will also be treading through unknown territory during the coronavirus lockdown. Most of their tenants will have had to temporarily vacate their premises during the lockdown period and they are likely to be experiencing disruption to their business and their income. However, landlords will still need to collect rent and service charges, which may present problems where the tenant is struggling.

If tenants are refusing to or finding it difficult to pay, it may be worth considering a payment plan to allow them to repay the rent at an agreed later date when their business has recovered somewhat. If this is not an option, landlords may wish to look at altering or surrendering leases to enable them to re-market the unit.

Both landlords and tenants will also have to consider new challenges that COVID-19 has introduced. Namely, when the time comes and tenants can return to their premises and offices, is the building safe for them to do so? What measures will need to be put in place? Things such as deep cleaning, access to the building and its facilities and occupant numbers are just a few of the things that will need to be considered.

How can we help?

At Hellier Langston we offer expertise across all aspects of commercial property that could be useful to you at this time.

Agency services

We can help tenants explore their work premises options going forward, whether that be downsizing to a smaller property or just looking for new premises more suited to their needs.

We can help landlords with any difficulties they are having with their property portfolio, whether they are looking to dispose of assets or acquire new premises, we can provide guidance through the processes.

Lease advisory

Our lease advisory team has significant experience of working with both tenants and landlords to ensure understanding of the obligations under the lease and how potential costs and losses can be minimised through lease restructuring, rent reviews and exploring break clauses.

Building surveying

If you are a tenant nearing the end of your lease, our building surveyors can assess any potential liabilities at lease end and make sure a suitable amount is budgeted for. If the lease ends in a dilapidations claim from the landlord, we can fight on your behalf to keep costs to a minimum.

From a landlord’s perspective, our Building Surveying team can assist you with issuing Terminal Schedules to ensure the tenant complies with their repairing and decorating covenants. If the tenant fails to do this, we can work with you to secure dilapidations claims against the tenant to enable you to return the property to a lettable condition.

Valuations

Our RICS-registered valuers can assess the value of your holdings should you need this information for potential lending or accounts purposes. The advice can be on the capital value of the holding or the leasehold value. Valuations may also be utilised at board level for information purposes.

Property management

If you are responsible for maintaining your property, our property management team can step in and help if you require further expertise to combat additional challenges that COVID-19 may present. This could be anything from ensuring regular deep cleans, putting new procedures in place or ensuring social distancing is possible for tenants on-site.


Find out more about the services we offer, or get in touch if any of the above topics apply to you or your business and you would like to discuss your requirements further.


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