Landlords and retailers alike moved quickly to address the economic crisis during the Great Recession in 2008 and 2009. The commercial real estate industry has not been as uniform when it comes to addressing the financial pains the COVID-19 pandemic has caused, Excess Space Retail Services Founder and President Michael Wiener told GlobeSt.com, however.
“During 2008, I think that it was such a shock to our financial system and everybody recognized that something national in nature was happening here in our country,” Weiner said. “This is different. Different parts of the country have experienced spikes at different times.”
Weiner also noted that the mixed messages surrounding the pandemic has put landlords and retailers in a position where they’re not sure how move forward. There’s also a lot of uncertainty around how long the pandemic will last and what the industry is going to look like in the future.
“Everything does revolve around the pandemic and how long businesses have to stay at 25% to 50% capacity,” Weiner told GlobeSt.com. “Nobody knows how long this will last. People are taking a lot more time in the process and being more cautious.”
For the time being landlords are reacting slowly, according to Weiner. The same goes for retailers who are in no rush to process anything. The industry is in a “wait and see” state of mind when it comes to leases. There is no wait and see for those retailers who have filed Chapter 11 already such as J C Penney, Neiman Marcus, Century 21, Brooks Brothers, Pier 1 Imports, Modell’s Sporting Goods and the list goes on.
“I think there is a certain amount of hesitation in the environment that is pervasive and unlike anything I’ve ever seen before,” Weiner said. “There may be hesitation from healthier retailers but there was no hesitation from all of the retailers that are now gone through Chapter 11” retorted Rich Berliner, Publisher of Connected Real Estate Magazine. “I’m not sure where Mr. Weiner is coming from on this topic. I respect that from where he sits there may be uncertainty but I think the charred landscape of empty retail stores shows that many were unable to weather the storm and left landlords with tons of empty stores”, he continued.
The hesitation is not universal, however. There are some businesses that are moving ahead as usual—there are retailers that are continuing to remodel their stores for example. The more common theme however is landlords and retailers are engaged in discussions about rent relief. There have been efforts to find a balance between the landlord and retailers and to figure out what can let both parties move forward. For now, no one is in a hurry to make a significant decision, according to Weiner.
“I think people don’t know when things are going to be moving forward,” he said. “You’ve seen retailers that are open one day and had to close their doors the next.”
Weiner recommended that any rent relief-focused conversations remain as simple as possible. Otherwise there’s a risk of making talks too complicated and the chances of getting relief decrease significantly. That will only lead to lengthy negotiations—the exact opposite of what landlords and retailers need right now. Retailers can always resume discussions if they want provisions added to a lease once things have settled down.
“You can always go back to the landlord at a later date and time and renegotiate other points that may be important to the retailer,” Weiner said.
Joe Dyton can be reached at email@example.com.