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Landlord & Tenant Relationships: Local Tenants vs. National Tenants

June 29, 2020 | By Steve Collins, The Palomar Group 

When we set out on the Freedom Tour our goal was simple: to see people. See our clients and friends that we have missed over the past few months as our nation has gone through COVID. Reconnect, in person, with everyone we have missed. While on the road we accomplished a lot more than just seeing people. If I put into one post everything we learned while we were on the road it would take way to long for anyone to read so I am splitting it up. Here is Part 1.

We talked with landlords, many of which, when the pandemic started were working under the assumption that rent collections were going to zero. Overall, they are thrilled with the amount of rent they had collected through this. Expectations have been exceeded and landlords are optimistic about the future as the nation reopens.

Landlords are most encouraged by the efforts mom and pop businesses have made to pay rent. Times have been tough for these tenants, but landlords have worked with them and tenants have worked with landlords. By in large, communication has been great and both parties have worked together to find creative solutions to help everyone make it through this unique time. It has been proved that these tenants and landlords truly are in a partnership, with the goal of having everyone not only survive, but succeed. The relationships that have been forged between these mom and pop tenants and their landlords will hopefully pay huge dividends for all over the next few years and allow both tenants and landlords to be successful. The efforts made by these tenants will not be soon forgotten.

We also heard that the same cannot be said for national tenants. Every landlord we talked with said between 80% and 90% of the problem tenants they have are national tenants. Not all of the national tenants have been problems. Grocers have paid every month and paid on time. Others have communicated well and worked with their landlords. However, many national tenants are using every tool in their arsenal to get out of paying rent. The behavior of these national tenants during this nationwide crisis will be remembered, and the damage done to their relationships with landlords could take years to repair, if ever. Will landlords be motivated to add these tenants to their centers when they know that when times get tough the mantra of landlords and tenants being in a “partnership” goes out the window?

Lenders and investors love to see national tenants on a rent roll, and that will likely continue, but will landlords be less motivated to lease space to these tenants? Will landlords be less willing to be flexible on lease negotiations with national tenants when their behavior is fresh in landlords’ minds?

Will landlords want more mom and pop tenants? These local tenants may not have the balance sheets or credit ratings that the national tenants have, but when times are tough these mom and pop tenants are going to communicate, work with their landlords and do everything they can do stay in business.

Time will tell.

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