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First and foremost, I hope everyone and their families are safe and healthy. Everyone has been affected by the recent impact of COVID-19, landlords especially. All product types are expected to see headwinds in the coming months. I have been in close contact with many of my clients, colleagues, and tenants to discuss how to best handle what is coming on April 1st and beyond. Here is what I am hearing that may be helpful to other landlords:
- Tenants are being negatively impacted, but some are actually benefiting. Hardest hit tenants we are seeing are: restaurants and bars, fitness tenants, salons, and most common retailers. Grocery stores, local markets, pharmacies, drive-thru fast food, e-commerce industrial supply chains, and others have seen a surge in sales.
- Most every landlord I have spoken with that has tenants negatively impacted by the Coronavirus are doing some type of rent workout. Right now, most have resolved to defer rent for the next 3 months. Others are doing half rent deferred for the next 3 months. Many landlords are waiting to see what will happen in 3 months, at the same time realistically expecting tenants will struggle to pay rent for several months. Most landlords are having the deferred rent scheduled to be paid back over 12 months starting in January 2021. The Irvine Company took this approach.
- Many tenants that had weak businesses before this pandemic hit, will close their doors for good. We have already heard from many tenants that have called to say “We will not be paying rent anymore and we are not coming back”. Based on this feedback we foresee a significant increase in vacancy in the coming months.
- Due to most businesses being closed, there have been massive layoffs. This will cause many businesses to rebuild from the ground up whenever things return to be somewhat normal.
- Many landlords are concerned about paying their mortgages if tenants stop paying rent. The Federal Reserve’s actions may give banks the leeway to defer mortgage payments. I will send a separate email on this once we get more clarity on this issue.
Each landlord is in a different position, but we are all in this together to find solutions. If you have any questions about what to do with your property please feel free to contact my team. All the best to everyone out there. Be safe, wash your hands, and stay home.
- This article was written by Nathan Holthouser on March 26, 2020 in response to LA TIMES Article: Retailers Coronavirus Rents