March 25, 2020
Now that the initial shock has worn off and we’re all adjusting to indefinite business and school closures, social distancing and empty grocery store shelves, it’s clear that we are in for an extended period of disruption.
We must act quickly to create a “new normal” for the massive uncertainty and financial unknowns in the months ahead.
Countless companies are scrambling to cut costs and conserve cash as they see revenue drop or get delayed while their customers try to make sense of this sudden economic contraction.
That’s a real problem for landlords. Their customers are suddenly struggling, and it’s in the interest of both parties to find mutually beneficial solutions that will help each other succeed.
Since real estate is usually the second- or third-largest cost for companies after payroll and benefits, it’s critical to proactively have open and honest conversations with landlords right now. Be candid about financial health, cash flow, ability to pay and what sort of temporary relief would help.
We’re asking landlords to step up when appropriate, advocate for your tenants, and take bold and creative measures to support them and keep them and yourselves financially solvent during this unprecedented situation.
Be open to modified lease terms, temporary rent abatement, discounted payments, and other creative ways to modify rent obligations in the short term until tenants can provide better insight and confidence on their own revenue trends. We also hope to see landlords accept shorter term leases that give tenants the flexibility they need in this new economic reality.
There’s a powerful incentive for landlords to work with tenants on creative solutions: modified rent payments could be the difference between a tenant surviving this downturn or going out of business entirely, in which case the landlord gets nothing at all. Neither party wants that.
Some landlords are already taking proactive steps.
Denver coworking firm Shift Workspaces won’t charge April rent to its 500 members because of the economic uncertainty. In Orange County, California, landlord Irvine Co. offered its retail tenants a three-month rent delay. Atlanta’s mayor signed emergency legislation that temporarily reduces rent for restaurants, stores and car rental companies at the world’s busiest airport.
The U.S. government already delayed tax filing deadlines and payments for taxpayers for 90 days, and many mortgage companies are working through plans to offer relief on payments and delay foreclosures for people affected by the coronavirus closures.
Let’s work together quickly to create new solutions and innovative deal terms that meet each tenant’s unique and fast-changing business needs, and still allow landlords to pay their mortgages.
It’s good for business, it’s good for the economy and it’s the right thing to do.
Co-Founder & CEO of Transcend