An open letter to commercial landlords and tenants:
These are unprecedented times. Not since the 1918 Spanish Flu has a pandemic shaken our world.
While all levels of government struggle to respond to the COVID-19 outbreak, businesses are grappling as well.
According to the Government of Canada, nearly 70% of Canada’s workforce is employed by small business. Small business are defined as having 99 or fewer employees. Small businesses employ your family members, friends and neighbours. They contribute to the community, provide essential services, create the places Canadians go to eat, socialize, get their hair cut, get in shape, and where they seek medical assistance. Small businesses are the backbone of commerce in your community.
In recent days many small businesses have been told to close for the benefit of that same community. Business owners must make tough choices about their staff and other expenses such as rent.
More and more I’m asked by landlords and tenants what they should do. Tenants are reaching out to Landlords for rent concessions; landlords are evaluating how concessions might affect their ability to pay their commercial mortgage obligations.
Since this is new territory, here are a few things to keep in mind.
- Remember that many landlords are small businesses with employees who have families, too.
- If you are a tenant, look for ways to reduce non-essential costs. Also, look for novel ways to generate revenue. Creating take out windows or food delivery in the case of restaurants are obvious. Less obvious is to presell services to your most loyal customers or sell gift cards with the idea that support now will translate to your business still being there for the community when things return to normal.
- Investigate what financial relief programs are available from the government and financial institutions to help landlords and tenants.
- Open a dialogue with your bank. Let them know your circumstance. Ask for help.
- If you approach your landlord for rent concessions, be prepared. Come to them with a plan. Map out how your plan will keep you in business, and how you intend to compensate them over the long-term, i.e. If your rent gets deferred, when will it be paid back? Will you extend your lease equivalent to the length of time you are asking, or provide some other option?
- Prudent landlords will listen and assist where they can.
If we allow small businesses to fail, we’ll lose up to 70% of Canada’s jobs and the very fabric of our communities.
The Landlords I’ve spoken to, understand the landlord/tenant relationship is a symbiotic one. Now more than ever is the time for win-win thinking and collaborative action. Only by working together will we emerge from this pandemic to a healthy and prosperous future.
JR Mercantile Real Estate Advisors Inc.