These shifts are prompting changedexpectations on the office footprints oftech firms, according to the Savillstechnology practice group’s survey, with55% of companies saying they expect todispose of some portion of their officespace in the next 12 to 18 months.
—Rayna Katz
LANDLORDS NEED TO
TELL A BETTER STORY
ABOUT THEIR SAFETY
PRACTICES
Alandlord can spend a lot of money upgrading the building systems to try
to curtail the spread of germs during the
pandemic. But if they can’t properly com-
municate what they’ve done, their invest-
ments may not mean to tenants
“A landlord will sometimes have
installed UVC lighting or will have
upgraded their filters from MERV 13 to
14,” says Dr. Michael Gao, M.D., founder
of Haven Diagnostics. “Then, they send
their tenants a list of the things they’ve
done and say, ‘Look, we’ve done a lot.’
And the tenant goes, ‘That’s fantastic. I
really have no idea what that means for
me.’”
Instead of conveying all of the individ-
ual improvements they’ve made, Gao says
they should tell a more cohesive story
around how those efforts make the office
environment a place that can be lower
risk. “It’s that layer of translation between
what you’ve done to what it means for you
that I think a lot of landlords are currently
missing,” Gao says.
People have fears about how COVIDcan spread, such as it potentially infectingthem through vents and HVAC systems intheir offices.
“If you put yourself in an employer’s
shoes, what you care about is that when
your employees are in the office, that
you’re not exposing them to huge doses of
risk and that you’re helping make sure
that employee feels reasonably safe and
protected,” Gao says. “Otherwise, if they’re
really worried, they’re not going to be pro-
ductive.”
Depending on a company’s policies
and property management policies, Gao
says an office environment isn’t just lower
risk compared to a bar or a restaurant,
but a lower risk compared to other set-
tings.
Landlords that take steps to communicate safe practices will ultimately have anadvantage over those that don’t, accordingto Gao.
“We think that landlords who aremaking investments today and helpingcommunicate the benefit of thatinvestment, not just for COVID, but forany respiratory disease, we’ll be ahead ofthe market,” Gao says. —Les Shaver
request that they open for business if the
restrictions are not too onerous. For
example, if a restaurant is able to operate
for indoor dining at 50% capacity, the
landlord should require the restaurant
open at that level.”
Of course, these restrictions not only
have an impact on business operations but
also business revenue, which is often a fac-
tor of base rent. “In this situation, in lieu of
paying the base rent set forth in the lease,
the tenant will want the right to pay a per-
centage of its gross sales as base rent for as
long as the capacity restriction remains in
effect,” says Glick. “However, this arrange-
ment shouldn’t dispense the tenant from
paying its share of taxes, insurance and
common area expenses. It is in most land-
lords’ interest to agree to such an arrange-
ment since it is often preferable to keep a
store open rather than having it go “dark”
for any period of time.”
As restrictions are lifted, tenants and land-
lords should return to normal business
arrangements. “Once the capacity restrictions
are lifted, tenants will be expected to pay the
fixed base rent set forth in the lease in lieu of
a payment based on a percentage of gross
sales,” says Glick.
On the other hand, some tenants might
seek to renegotiate or even terminate leases
due to Covid- 19 closures or restrictions.
“Tenants may attempt to negotiate termina-
tion rights in their leases if Covid- 19 restric-
tions prevent them from operating in mate-
rial portions of their premises for lengthy
periods of time, ranging anywhere from six
to 18 months,” says Glick. “Landlords will
strongly resist providing tenants with termi-
nation rights based upon the argument
that they already have provided the tenant
with reduced rental obligations that will last
for the length of any material Covid- 19
restrictions.”
If a landlord chooses to take this option,
Glick recommends that they negotiate any
outstanding costs. —Kelsi Maree Borland
UPFRONT
