August 12, 2020

Working Together as a Team: Negotiating With Tenants and Leasing Space During COVID-19

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.

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 the ways they show and lease space to new tenant preferences and safety expectations.

• Respondents spoke favorably about offering tenants reasonable rent relief packages to help them weather short-term disruptions associated with COVID-19.
• Owners commonly request tenant financials to demonstrate they have a COVID-related need for assistance.
• Many owners seek assistance from lenders to help them pay for property maintenance, taxes and insurance during periods when tenants are deferring rent payments.
• Industrial leasing activity remains robust, though shorter-term leases are more common than they were before the outbreak.
• Respondents reported greater tenant interest in suburban office properties.
• Prospective office tenants expect buildings to have standard health safety protocols in place.