The impact of the pandemic on commercial lease renegotiation: a series

May 13, 2021 BDO CANADA

Businesses are experiencing a period of critical change with permanent effects. Every business model, whether it’s B2B or B2C, will have to adapt to a new reality. Business owners will need to innovate, change models, and make strategic decisions, whether it’s finding a way back to profitability and generating the cash flow needed to meet financial obligations, or attracting the resources to handle a heavier volume of business. This will be more difficult for some entrepreneurs than for others.

In this two-part article series, we take a look at how organizations can operate more efficiently after the pandemic by rethinking their real estate footprint. Several potentially advantageous options can be implemented, whether you are a landlord or a tenant, and whether your premises are an office, industrial, or commercial space.

First, let’s consider the options for tenants.

Ask yourself these strategic questions:

  • Is my real estate space still suited to my operations?
  • How will my business or industry change over the next few years?
  • What improvements can I make in my spaces to achieve better performance?
  • How will my customers respond after the pandemic? What will their new consumption patterns be, and what new expectations will they have of my services?
  • How will remote work and the use of technology affect my business and my business model?
  • How can I protect employee and customer health and safety in my spaces?
  • How do I attract and hire new talent?

What are some alternative options?

Consider the following:

  1. Reducing the space footprint or subletting part of it.
  2. Reducing base rent and deferring the difference to the end of the lease.
  3. A rent adjustment for a specified period, based on a percentage of sales (commercial premises).
  4. Terminating the lease for spaces located in different buildings (satellite offices).
  5. Extending the term, with equalization of the base rent.
  6. Extending hours of service in response to demands for flexibility.
  7. Adapting leasehold improvements to current needs.
  8. Obtaining certification that business operations comply with sanitary requirements.
  9. Access to specialized common spaces and/or janitorial services.

How BDO can help

BDO Canada and NAI Terramont Commercial can help you adapt a variety of real estate solutions based on your business needs, to ensure your leased space is an asset and not a financial burden. We can help you with:

  • Developing and implementing plans for transformation and change
  • Budgeting and business plan creation
  • Financial recovery and fundraising
  • Renegotiation and renewal of leases
  • Company relocation
  • Acquisition and disposition of assets, rentals and subletting, and sale-leasebacks

For more information, contact:

Chantal Cousineau, Partner, Assurance and Accounting, BDO Canada LLP

Alain Côté, Senior Vice President, NAI Terramont Commercial

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