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First Person: Commercial Real Estate Company Pivots Due to COVID-19

For companies that have held off thus far from letting go of coveted and devoted employees, they’ve been seeking alternative, creative ways to slash budget and reduce working costs, quickly. Within a budget, after the first line item of headcount usually comes the next line item: office space. That’s where my team at SquareFoot, a commercial real estate company, comes in.

In truth, we will likely never return to the same way things were for businesses before Covid-19 changed everything. However, I am optimistic about where our industry goes from here. For most people, working from home has been a temporary reprieve, not a long-term solution. In fact, we believe more people will emerge at the close of months of working remotely ready to get back to their routines—including their commutes. And office spaces will play a big part in it. Yet, right now, with no definite idea of when we will again inhabit those spaces, carrying the burden of an office lease is too costly for some business owners. That’s how we can help.

During the uncertain weeks, when it was no longer safe to do office tours, I instructed my team of in-house brokers to transform how they saw their roles and what services they can offer to others. Overnight, we re-assigned them to be what we’re calling trusted advisers on behalf of executives in need of valuable education and hopefully also some relief. 

After we have reviewed and summarized existing current leases, we have shown people among the following options available:

  • Checking with your insurance agent about your Business Interruption Insurance coverage.
  • Subletting the space
  • Posting empty desks on PivotDesk, a business unit SquareFoot owns and operates to rent out (as a host) a small number of desks within an office (to a guest) to share the space;
  • Proposing rent abatement now from the landlord and renegotiating with them a term at a higher escalated rent on the back end; and
  • Walking away. In some select cases, it’s best for everyone to close up shop and to leave the landlord with your security deposit after vacating.

As we lay out these plans, we reflect on what emerged in the commercial real estate market coming out of the 2008 financial crisis. If recent history is a guide for the future, we can anticipate that subleasing will increasingly become a part of the conversation: subleases then rose from 20% of the market to 45% after the stock market crashed. If we see that’s where we’re heading again now, it’s smartest for those holding long-term leases to act quickly, ahead of others realizing this trend is on its way. Whenever more of these types of transactions are being requested, after the quarantine lifts, subleases will be harder to come by. Beat the rush.

In addition, after the financial crisis of 2008, we witnessed a sharp increase in the number of tenants looking to renew their lease or arrange for a short-term extension of their lease. Those willing to work early and efficiently directly with landlords to get this worked out proved to be the better off. Discussions of lease renewals are not yet to come; they’ve already begun. Landlords and tenants are already figuring this out—carvin short-term extensions that also offer incentives such as free or reduced rents. It’s the right time to look into what landlords will do to keep you on as a valued tenant.

At a time like this, when reducing costs is the primary concern and responsibility of many business owners, we are happy to play a part in proposed solutions. We want to help people keep their employees in place, while doing what’s best for them when it comes to office spaces, too.

Jonathan Wasserstrum is the Founder and CEO of SquareFoot, a commercial real estate company.

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