COMMERCIAL LEASES AND FORCE MAJEURE
CD: Reflecting on the last 12 months or so, could you provide an overview of key trends shaping the commercial property market?
Bensman: The dominant trend, of course, is tenants searching for an escape from expensive office and commercial leases as restrictions continue to keep workers and customers at home. Most leases do not permit the withholding of rent, and we have seen a fair bit of negotiated rent deferral. New York and many other states have eviction moratoria in place, as well as restrictions on enforcement of personal lease guarantees, so there has not yet been too much in the way of that.
Langerak: In the US, there is certainly movement from brick-and-mortar retail to e-commerce to the extent the tenant has those capabilities. The pandemic accelerated this already trending phenomena in 2020. It was exacerbated by changing consumer trends relative to stay-at-home orders and embracing social distancing for personal safety. Countless tenants in 2020 started work-out conversations with their landlord, referencing the tenant’s limited foot traffic and significant sales reduction. In sum, defaults significantly increased. For retail shopping centres in particular, the impact on the centre as a whole has been hinged on the nature of the centre’s tenant-mix. Generally, shopping centres with anchor tenants deemed ‘essential’ – like grocery stores – have fared better as a whole because foot traffic at the centre has remained high, relatively speaking. However, properties such as shopping malls have fared far worse.
Apr-Jun 2021 issue
Brown Rudnick LLP
Cleary Gottlieb Steen & Hamilton LLP
CMS Cameron McKenna Nabarro Olswang LLP
Stoll Keenon Ogden PLLC