Kyle Crown is the President of Crown Commercial PM. He holds a B.S. in business from the University of Pennsylvania’s Wharton School.
Let’s not sugarcoat it: 2020 has been an incredibly difficult year. The Covid-19 pandemic has wreaked havoc on our communities, taking its toll on lives and jobs. A vaccine would be great; a time machine would be better. But while we have neither, the best we can do is use what we know to help each other weather the storm.
In the business world, workplace closures have struck a devastating blow to owners and tenants of commercial properties. But property managers can play an important role in easing the burden on these businesses so that they’re able to stay in their locations. Managers can also maximize revenue for owners that may not have much experience on the collections side of the business, acting as crucial intermediaries. Here’s a broad blueprint for how property managers can assist (and avoid losing) their commercial tenants during these unprecedented times.
The first practice I recommend might be the most obvious: If the businesses in your commercial units can’t keep up with the agreed-upon monthly rent, defer (or partially defer) their rent for the remainder of this year until next year. When they’re back up and running at full speed, they’re more likely to be able to make up for the deficit they’ve incurred during the pandemic. If a deferral doesn’t provide enough immediate relief to keep them on their feet, you could decrease their rent for the beginning of 2021, with repayment for the decrease built into the back end of the contract you arrange.
A second way you can help your commercial tenants stay put and pay rent is through assisting with tenant improvements (TIs). In the case of the pandemic, this may include things like installing plastic shields in workspaces so that your tenant’s business can reopen in compliance with Covid-19 regulations, which will help them begin earning enough to continue paying rent. Some other examples of tenant improvements during this time are outdoor tents for hair salons and outdoor seating for restaurants, neither of which are allowed to operate indoors here in Los Angeles right now. It’s a good idea to write up an addendum to the lease agreement in these cases, specifying that the outdoor space is only for use until the pandemic passes.
Finally, and perhaps most importantly, you can do your commercial tenants a world of good by simply listening to their unique needs as a business. One of our favorite mantras at our company is “One-size-fits-all fits none.” A frozen yogurt shop is undoubtedly facing a different set of challenges than a big-box retail store right now.
Communication is key to understanding the stressors that threaten these businesses, so I recommend talking in-depth with each tenant about their specific pain points. Chances are they know their professional field better than you do, so they’ll be able to give you a clearer sense of what the future might look like for them if the pandemic continues in its current state for another four, six or eight months. In the long term, a quality tenant is always worth working to keep. To help a commercial tenant carry out their vision, you’re going to need to get on the phone (or Zoom) and have these conversations.
When this pandemic is behind us, no small business owner should have to look back on 2020 as the beginning of the end. If you apply these practices and help your commercial tenants find ways to stay in their buildings, hopefully they won’t have to. Everyone involved wins in the long run when we work together to keep small businesses afloat.