Rents are driven by the capacity of a business to perform (sell).  Rent per square foot is driven by sales per square foot.  If businesses do not see sales rebound to pre-pandemic levels, they will not be able to afford the same rent they were paying prior to the Stay Home order. And this will be true for all businesses.  Given where sales are likely to be after the end of the moratorium, landlords should monitor sales and consider:

  • Keeping spaces occupied – vacant spaces deteriorate quickly, hurt lease and sales values, and affect the vibrancy and overall health of the neighborhood.
  • Consider moving rent charges to a percentage of sales for three months at a time while monitoring sales, keeping rent in line with what businesses are actually earning.
  • Collaborate with tenants regarding changes that may help them comply with requirements to keep employees and customers safe, therefore allowing the business to operate.
  • Until there is a cure/treatment for the coronavirus, it is likely we will see rolling periods of closures as outbreaks flare, which will impact sales. So flexible terms with tenants will be critical.
  • Remember that the more we can support businesses to reopen and continue operations, the faster the economic recovery will be.

Since this is a concern that has been flagged for the re-opening period, not much has been shared in terms of best practices yet, with data on reopening just now coming from China and Europe.