12 Jun 2020

Returning to the "new normal": Property Issues

MHA Monahans New Normal

It is said that necessity is the mother of all invention, and this has very much been the case with commercial premises following the lockdown requirement to work at home wherever possible.

Many businesses will have seen the relative success of having a significant proportion, if not all, of their work force working from home and this should force them to cast a critical eye on the size and location of commercial premises as restrictions are lifted.

With staff, clients and suppliers becoming acclimatised to operating in a more virtual world of video conferencing, using emails, document portals and remote access to business systems becoming the norm instead of for example face to face meetings, extensive business travel, regionally, nationally and internationally and postal services, the requirement for commercial premises on the same pre-crisis scale has in most cases fallen away.

The nagging question for all businesses, must therefore be whether they require the same size premises, in the same locations – or in fact in some locations whether they need a presence at all. Rent and rates are often one of the largest single costs of a business and therefore reducing them, particularly when there is no visibility as to how quickly economic activity will pick up as restrictions are lifted must be a priority. If reduced staff numbers are also thrown into this mix, this adds to the urgency of reviewing premises requirements.

Quick wins in this regard might be obtained by sub-letting part of premises once the requisite landlord consents have been obtained, or not renewing leases that are near expiry, or ending early less formal licence arrangements. Discussions with landlords might yield some short term rent relief, but it is important to recognise that this must be discussed and agreed with landlords first.

One further thought revolves around social distancing, and the return to work – potentially this may require more space……..which will make planning for the return of staff even more difficult, as businesses may need to consider splitting their work force into shifts, with a large core of staff continuing to work from home. Matters such as childcare, partners and spouses working patterns, client and supplier expectations of “office hours” service when staff are not necessarily working those hours will all impinge on how businesses view the space they have and ultimately whether it is still needed.

In time, it is more than likely that a significant proportion of businesses will not need the commercial space they have now, so they should consider this issue now, as should commercial landlords as this will have knock on implications for them.