By Neil A. Dolgin
Nearly nine months into the pandemic, the long-term impact on commercial real estate is still anybody’s guess as virtually every industry continues to feel the economic fallout.
Over the past month in New York City alone where life finally appears to be returning to some normalcy, multiple hotels, including the Times Square Hilton, two Marriott Courtyards in Manhattan and the Omni Berkshire Place, have all announced they won’t be reopening.
This is on top of the nearly 1,000 restaurants and bars that have closed here since March, while major national retailers such as Lord and Taylor, Brooks Brothers, J. Crew, Neiman Marcus and countless Main Street mom and pop stores across the country have either filed for bankruptcy or been permanently shuttered. At the same time, nationwide demand for office space has also slumped drastically amid unprecedented layoffs, more people opting to work from home, and heightened social distancing practices that are likely to continue even after a vaccine becomes widely available.
All of this being said, however, there will always be a certain level of necessity for commercial space. It is also the landlords who negotiate with flexibility, fairness and a willingness to adjust nimbly to the new normal that are most likely to prevail over the long haul. The same holds true for commercial real estate brokers who are truly able to understand their clients’ needs when it comes to finding the right space and helping them maximize its full potential versus simply trying to get a quick commission.
What KDA Has Done to Go the Extra Mile for Our Clients
Right now, many commercial real estate firms, including ours, are working at 50% occupancy and remaining staff and brokers are working remotely. However, as anyone familiar with CRE knows, ours is a profession built on relationships and human interaction, particularly now, and our headquarters office in Brooklyn has remained open since the pandemic began. One of the main reasons for this is because we realize how crucial our availability and presence is to managing and maintaining the buildings we own and operate.
For instance, we have a lot of tenants that were deemed essential businesses during the lockdown and had to remain open. This includes everything from medical offices and industrial tenants that manufacture personal protection equipment to food suppliers for supermarkets and bodegas, as well as restaurants who were doing takeout. This meant we had to be around also to help oversee the day-to-day operations of our buildings and make sure everyone was properly protected.
While many of our brokers worked remotely, I personally came into the office every day during the lockdown and my brother Kal and our two sons Josh and Grant were often there as well. We also had a bookkeeper who was here twice a week to handle the billing and correspondence with tenants. So there was always somebody onsite if a tenant needed or wanted to come by in person with full PPE and social distancing protocols in place. We also reconfigured our computer and phone systems so that all of our brokers and support staff could be reached from wherever they were offsite.
Working with Tenants
We worked with our tenants and helped them with the PPP applications in order to receive the necessary funds to survive. We also helped with SBA Loans which allowed tenants to pay bills and remain at their present locations. Many of our tenants have thanked us.
We made every effort to work with tenants and we didn’t evict anyone even as we tried to maintain the integrity of our business all at the same time. As a result, at least 98 percent of our tenants, many of whom were waiting for PPP assistance and needed to remain operational, were able to pay us in full. We have maintained a consistent approach with our tenants from day one to ensure that everyone’s individual circumstances are taken into account and they are treated fairly.
Reassigning and Subleasing Space Has Major Upsides
Not surprisingly, many commercial and industrial tenants have suddenly found themselves paying rent for far more space than they need either because of layoffs or a slump in business. For those currently facing this predicament, subleasing or reassigning space is a viable alternative that we’ve been offering many of our tenants in cases where we’ve been able to do it. Of course, it’s never easy, especially nowadays with the added cost of heightened sanitation measures on top of normal moving and construction expenses. However, if we’ve had the properties available and tenants were willing to do it, we’ve done everything possible to accommodate them whether it’s been upgrading from something smaller to larger or vice versa. We’ve also been working with a number of clients to help them find suitable sublease tenants for their space to create a win-win situation for everybody involved.
Finding the Light at the End of the Tunnel
Although the pandemic will leave an indelible mark for years to come, the good news is that there are many opportunities in commercial real estate as an influx of industrial buildings of all sizes comes on the market and prospective investors, tenants and brokers keep an eye on these properties. With retail space often on prime corners available for the lowest price in years, this is one option for those with imagination who can withstand a higher risk.
For those who want less risk, industrial real estate may be a good route given the shift to ecommerce by companies like Amazon during the pandemic that has boosted the already high demands for industrial space while self-storage facilities, industrial facilities and data centers have heightened demand even more. Likewise, there are many opportunities in each of these areas for brokers who can adapt to the changing needs of the marketplace and offer creative solutions.
As for the commercial real estate industry itself, it will continue to be tested and transformed accordingly as it has after other black swan events such as 9/11, the 1998 financial meltdown, the tech bust, the S&L collapse of the 1980s and so on. And I have every confidence that we will come out stronger and better than ever. #
Neil A. Dolgin is co-president of Kalmon Dolgin Affiliates. Founded in 1904, Kalmon Dolgin Affiliates (KDA) has grown into one of the New York metropolitan region’s leading commercial and industrial real estate firms. Kalmon Dolgin Affiliates specialize in all aspects of real estate services for developing, managing, selling, leasing and marketing commercial and industrial property. KDA’s highly-trained professional brokers offer clients a practical, street-wise approach to commercial and industrial real estate brokerage, leasing and sales, supported by the latest in real estate marketing, management and research technology.
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