It looks like Covid-19 and everything that comes with it is here to stay for some time. What’s more, the repercussions of the pandemic are yet to play out. If you own commercial property during Covid-19, especially office space, this is a worrying prospect. Social distancing, working from home and the furlough scheme could all have a negative impact. However, there could be opportunities to mitigate your risk. In this article, Mark Ludiman, Director at Hewetson & Johnson shares his advice for owners of commercial property during Covid-19.
In the short-term, how can we expect the market to change for commercial property owners?
- Fewer people coming to the office
- Less space needed
- More office space required at cheaper rents
- Break notices being served
Given the current situation, it is likely that all of the scenarios above will be commonplace. As a result, there are opportunities to purchase property as space inevitably becomes empty. While some tenants look to downsize, upsize or move elsewhere, there will be other tenants looking to fill the void. The general consensus is that empty space needs to be let as soon as possible.
Listening to tenant needs
Additionally, consider how you can change the space to adapt to the market and appeal to more potential tenants. Listen to feedback from unconverted viewings to see if there are ideas to meet new needs. Another source of ideas may come from your current tenants. To that end, ask how their businesses are changing as a result of Covid-19 and what you can provide to support them.
Converting larger spaces
To an extent, the rural office market has been a victim of its own success. Many conversions took place without a consideration towards flexible working or quiet spaces for a private meeting. Trying to provide those facilities now can be tricky. One area of demand is likely to be for smaller office spaces in commuter-friendly rural locations. These could be either self-contained units or rent-a-desk type spaces (which take the place of hot desking). If you do look to convert larger spaces into smaller ones or communal working, the provision of a small meeting room or two is vital. If you are providing communal working space it is also worth considering what else you can sell to occupiers. For example, luxuries like proper coffee can yield a decent return even on a leased machine.
There is no doubt that the needs of the workplace are changing. Those businesses occupying busy and packed serviced premises will find they cannot operate within the new guidelines and will look to move. The key is understanding what attracted businesses to those places and providing the benefits in a safe working environment.
As owners of commercial property face a reduced rental income during Covid-19 and beyond, small changes can make a positive impact. Improve the rent per square foot by simply making better use of under-utilised space. By better understanding potential occupants and their needs, you can find solutions to their problems and attract new lettings. As ever, the key is knowing the market and adapting to this very challenging time.