As the New Year is fast approaching, many businesses are feeling the pressure to turn a profit in a socially distant world. This is true for commercial landlords that have struggled to stay afloat as tenants continue to miss commercial rent payments. While some industries will likely bounce back, others – such as brick-and-mortar retailers, gyms, and movie theaters – are unlikely to rebound financially in the coming months. This leaves the landlords who lease space to these businesses unsure of how they will be able to manage mounting losses caused by the COVID-19 pandemic.
Multiple Industries Skip Commercial Rent Payments
The COVID-19 pandemic has put a strain on many businesses in 2020. While the financial impacts of the pandemic have been felt across various industries, commercial landlords have borne the brunt of it. Now, as real estate executives begin to report quarterly earnings, landlords of gyms, retailers, and movie theaters are looking to their tenants who have missed rent payments. Despite some commercial landlords having the means to work with tenants, countless others are putting much needed pressure on businesses that are able to pay but choose not to.
Despite rent collection from chain retailers and restaurants improving after lifting lockdowns in the summer months of 2020, movie theaters and fitness centers are among those yet to recover. According to the Financial Times, Spirit Realty Capital collected only 12% of the rent owed from movie theaters in October. Although theaters have reopened in most states to some capacity, the lack of new releases and low foot traffic have contributed to financial losses that have left their landlords in the dust.
Weingarten Realty Investors is also struggling to collect rent from these specific businesses, receiving only 35% of rental payments due from movie theaters in October and just 44% from health and wellness clubs. Tenant lease defaults can have a huge impact on commercial landlords who have to cover overhead items such as insurance, maintenance, and taxes.
The Long-Term Impact on Commercial Landlords
The commercial real estate market took a big hit when the pandemic caused widespread business closures and stay-at-home orders in late March. This resulted in many rent deferrals, tenant bankruptcies, and broken leases –detrimentally impacting many commercial landlords. While it might be easy to see this as a short-term impact confined to 2020, these effects will likely be felt in 2021 and beyond.
Pandemic health guidelines have altered commercial tenants’ needs and given non-paying tenants an excuse to avoid rent payments. And these changes will only continue to unfold. Retail rent has been hit hard, as many who once flocked to brick-and-mortar businesses turn to online shopping for nearly all their needs (including holiday shopping). No matter if landlords are able to negotiate reduced rates, these tenants may not survive in a post-pandemic environment – leaving landlords worse off than before.
As many operations have found ways to work from home either part time or permanently, commercial landlords have developed a major long-term concern for this shift in the approach to renting physical office space. Another long-term concern is related to small businesses adapting to new methods of service, like restaurants, which may attempt to cut overhead and reap profits by turning to delivery and pickup-only food sales methods. This ultimately results in a reduction of needed space, which will lead to a lease renegotiation in a weak market. Commercial landlords holding office or mall space may quickly find rental recovery lags behind when it comes to resolving the losses sustained due to the pandemic and its fallout.
Commercial Lease Dispute Attorneys
Commercial landlords have been and continue to be heavily impacted by the coronavirus pandemic. As businesses continue to wrongfully forgo rent payments and attempt to break leases, landlords remain unable to provide for themselves. Because leases between businesses are particularly complex, they require the need of a seasoned commercial lease dispute attorney. At Raizner Law, we have years of experience successfully representing landlords across Texas and throughout the nation. If you are a commercial landlord dealing with a large or national tenant that is delaying or refusing to make rent payments, we can help. Contact us today for more information.