In March 2020, shops, restaurants and offices emptied as the ‘Stay Home. Save Lives message echoed through the streets. The emergence of the Omicron variant in late November 2021 has also served as a stark reminder that the threat of new waves of infection continue to loom and 2022 starts with similar uncertainties as the start of 2021, however the real estate market is showing signs of recovery.
Behavioural changes (with more working from home, online and local shopping) mean that the requirement for both retail and office space has changed since the pandemic with tenants seeking to future proof plans with break clauses, monthly rent payments and other lease concessions when agreeing terms for new space.
The real estate market has continued to evolve in the face of the uncertainties and key changes that we have seen include:
(a) An increase in demand for different leases, including turnover based leases where part of the rent is based on the level of turnover generated by the tenant, which can be a valuable mechanism engaging both landlords and tenants – when the tenant succeeds, so does the landlord.
(b) Sub-letting of part - most commercial leases restrict sub-letting of part, but this is becoming more attractive, particularly to tenants that occupy offices.
(c) Tenants becoming acutely focused on clauses that may allow for rent concessions where there is a ‘lockdown’. Without such a clause the tenant must carry on paying the rent even though it cannot use the property.
(d) Flexible and alternative space -although there is more agile working as a result of Covid, this does not necessarily mean it is farewell to the office. In most industries there will be a combination of working from home and being office based.
(e) Commercial property holders diversifying their portfolio to more progressive lateral thinking regarding alternative uses for property, including the conversion of premises to residential property and the conversion to serviced offices.
(f) The advent of the Commercial Rent (Coronavirus) Bill (expected to become law in March 2022) means that the current restrictions on landlords’ enforcement action will continue to apply beyond March 2022.
We started 2021 talking about the Covid-19 pandemic, and the impact that restrictions and lockdowns were having on the property industry and 2022 has also started with some anticipation over the possible impact newly tightened restrictions might have. 2022 will no doubt be another roller coaster year but the changing legal landscape will form an important backdrop to transactional activity in the year ahead.
Lena Thakrar
Carter Bond Solicitors
Email: [email protected]
Telephone: 0203 475 6751
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