A newly released report by Jones Lang LaSalle (JLL) warns that Covid-19 is causing landlords to lose their upper hand when tenants negotiate discounts and negotiate more diverse payment methods than before.
This unit’s report analyzed that previously the pandemic was not a binding term in most commercial contracts.
Two front-facing houses for rent on Phan Dang Luu street closed on March 5.
However, in reality, under the unpredictable impact of the pandemic, landlords and tenants must agree on ways to support each other such as rent reduction or deferred payment.
Mr. Richard Fennell, Director of JLL’s Asset Management department, said that lessons learned from the pandemic will change the dynamics of commercial real estate.
This unit’s survey at many shopping centers globally has only collected 20-40% of total rent since the closure order took effect.
In developed countries, negotiations are moving towards solutions that regulate rental rates based on the retailer’s total revenue, which is also a popular form in Australia and the UK.
In a similar format, department store Myer is said to be negotiating rent payments equivalent to 6% of sales.
On the other hand, the pandemic that has fueled the strong growth of e-commerce has also reduced the asset value of landlords.
JLL said that instead of being conservative with the outdated rental model where the landlord always has the upper hand over the tenant, post-Covid-19 will bring the negotiation situation back to a more balanced level, promoting both parties to be on the same page.
In the near future, the terms of the lease contract will change in terms of rental price, lease term and strict requirements in protecting the health of customers entering and exiting the building.
