Since March 5th, when Governor Hogan declared the State of Emergency, we have all had to adjust the way that we operate, and this is especially true for commercial landlords. Social distancing and mask-wearing requirements were posted throughout buildings. Hand sanitizing stations were put in place. Deep cleaning and disinfecting procedures are being applied with increased frequency. Building improvements that include touchless features and upgraded HVAC systems are being considered, if not already installed. Tenants and visitors that are not feeling well have been advised to remain at home. For the past few months, commercial property management firms have been implementing a variety of measures to help mitigate the potential health and business impacts of COVID-19—measures that will continue to come for some time.
While obligations of the building owner vary from building to building, one thing is certain—building plans and budgets that were put in place at the beginning of the year did not address the black swan event that we are currently experiencing. Challenges remain present for both owners and tenants. As we all continue to navigate this time of continued uncertainty, MacKenzie Management Company offers the following five considerations for building owners.
Use this time to enhance communication with your tenants. They’ll appreciate frequent and meaningful status updates. In addition to keeping them up to date on building operations, there is a lot of information on government assistance programs that can be disseminated to tenants. As these programs evolve, such as the SBA’s PPP loan program, point tenants to resources to help them better understand and evaluate if the programs can help their business.
Rent Relief Concession
Prepare to have continuing discussions on rent relief with your tenants. Have a game plan in place for what financials and other information you’ll need them to provide, as well as an idea of what you’re willing to offer or not offer in terms of concessions. Depending on the tenant’s business and the terms in your agreements, you’ll need to evaluate every request on a case-by-case basis, but you should think about how best to administer these requests. This process can potentially be used as an opportunity for lease extensions in exchange for free rent, which can benefit both parties.
Revisit your budget to ensure you have funds that can be reallocated to line items affected by the pandemic. These could include additional janitorial expenses for increased surface cleaning (or even fogging should a tenant in your building test positive), replacement of fixtures with touch-free options, repurposing or replacement of common area furnishings, and signage to promote social distancing and other CDC recommendations.
Consider cost-saving measures such as refinancing your projects to capitalize on low interest rates, saving on energy expenses by buying through a broker or appealing your property taxes. These can free up funds to pay for budget increases like those listed in item #3 above. Of course, these are great practices in normal times, as well!
Rethink capital improvement strategies. You might have to put major projects on hold to free up funds for other expenses, or as a result of reduced income. On the flip side, if cash is still available, now might be a great time to start those projects that would potentially disrupt tenants. Lower building occupancy presents an opportunity to minimize the inconvenience of improvements such as elevator work or HVAC enhancements/replacements.
Contact MacKenzie Management to Learn More
While these considerations are being presented to offer guidance for navigating the ever-changing landscape of COVID-19, portions of each can be incorporated into the routine property management practices that support the ownership’s investment strategies and create positive tenant experiences. To learn more about property management best practices, contact our offices today and visit MacKenzie’s Management page here. We are proud to serve the Mid-Atlantic region with offices in Baltimore City, Baltimore County, Harford County, Howard County, and Annapolis.