Returning to office space – Food for thought!

Kerman & Co. website
June 2020 Publications

The silver lining to this cloud of the prolonged episode of lockdown has been proof that most people who routinely work in an office environment can, and are clearly working well, from home.  All the usual concerns of effective supervision and productivity outside pandemic driven effects have been overcome. The conventional wisdom of people needing to see people face-to-face daily to foster a cooperative team orientated business culture of bonding and loyalty has been blown apart in the face of Zoom, Microsoft Teams and other video conferencing facilities.

The next stage of this dawning being the impact on space and rents will follow in time, however of greater need for now, is the consideration of the interim and staged return to office space already under lease and the costs and issues involved.

A plethora of advice exists on risk assessments, the protection and safety of staff and how that is managed, however there are other considerations relevant to both Landlords or Tenants worthy of consideration:-

Rent Concessions: Most office space Landlord and Tenants have been involved in discussions on rent concessions and holidays of some kind and a lot of those will be undetermined.  What happens next?  Will there be Landlord calls to pay up as space is resumed.  Will Tenant cashflow be able to sustain this?  What happens when the moratorium on forfeiture ends  and will there be further legislation to consider?  What view will be taken by Landlord lenders?  It is highly likely that there will be no black and white answers to these questions and so proactive engagement in dialogue and an attitude towards reasonableness are vital to navigate through.

Fit Out and Development: Many Tenants will have entered lockdown with fit outs in progress with licence provisions providing for strict timeframes for completion.  The reality will also be that rent free periods for the works are likely to also be running down.  If this affects you then you should be considering negotiating extensions of both.

Lease Negotiations: Many will have been mid flow when lockdown started.  Working practices have shown that working space must be reconsidered.  With a workforce not only more able to but desirous of engaging  in flexible agile working, is relocation to a smaller space more beneficial or is larger space or a different demise layout needed to accommodate social distancing policies?  Special COVID clauses should now be considered so that if a similar lockdown were to occur in the future, then rent in full or part should be stopped contractually and not require negotiation.  In the alternative is there insurance to cover a global pandemic available?

Service Charges: Returns will bring about issues of deep cleaning, systems perhaps requiring money spent in repair as they are restarted having been mothballed for months, and crucially the implementation of social distancing measures and policies particularly in common parts.  Who will pay for these measures?  Landlord or Tenant?  If your lease provides for a Landlord to take measures to commit in the interests of good estate management, are they “reasonable” in the interests of good estate management?

Demise Management: With the need for risk assessment along with duties of care to staff and visitors, policies on hygiene, social distancing, partitioning and their implementation and the reworking of fire evacuation amongst the planning required due consideration needs to be given on what consents are needed under Leases?  What does the lease say on 24/7 access and timetable usage?   If you are in a multi let building and if staged returns are implemented, is there a potential for breach of covenant?  Is a waiver of liability or formal consent needed?  In light of government advice to avoid public transport, will more alternative commuter facilities be needed e.g. bike racks, more showers and changing rooms.  What does the Lease say – what consents will be needed?

Originally published at Kermanco.com prior to the firm’s combination with Armstrong Teasdale in early 2021.

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