Article contributed by Mike Berman, COO, Day & Nite/All Service
Understandably, trying to renegotiate your lease is an appealing tactic. However, history and growing evidence shows this to be a poor business strategy. As strategy must always drive tactics, before even considering lease payment relief discussions with a landlord the smart operator develops a compelling case.
Nobody questions the serious economic blows Covid-19 has landed on restaurants, hotels and the entire hospitality sector. Fact is, commercial real estate has suffered at least the same consequences –arguably worse– subject to lingering effects well after there’s a return to near or full indoor capacity. Landlords and building managers surely can’t find fault with the core economic reasons why you’d want rent relief, but granting any exceptions is tantamount to (their) becoming a partner in your business.
After all, commercial real estate –particularly prime street level space typically occupied by restaurants– is the very definition of a finite resource. Commercial real estate professionals are obligated to maximize yields on their (most) precious assets. Accordingly, the critical question you must answer is: why should your landlord make a rent reduction investment in your concept?
Interest rates are every bit as important to commercial real estate as the price of food is to hospitality.
Although interest rates have stabilized in recent weeks, thus far 2021 rates have ticked up with many leading indicators suggesting continued volatility. Property valuations are also anything but certain, creating reasonable unease for both developers and financial institutions holding mortgages. In sum, every landlord not only feels hospitality’s pain they are living it every bit as deeply as our industry is. Sympathy alone cannot justify reducing rent, your compelling business case will determine whether or not any landlord can rationalize the risk. Unfortunately, many of the measures being taken fall far short of compelling business arguments.
The Centers for Disease Control’s most recent guidelines places low value on surface cleaning as a method for protecting against coronavirus and other dangerous airborne pathogens. Wearing shoes, shirts and washing hands after a trip to the restroom are minimal hygiene standards. Of course maintaining a clean facility is important—but hardly compelling. For a landlord to contemplate a rent concession you must take tangible action by wisely investing in your business first. Indeed, demonstrating confidence with a meaningful plan to drive your business forward must form the basis of your strategy is as necessary for your own success as it is for having a landlord buy in. Return on investment is the ultimate calculus—for your own enterprise, for all stakeholders, particularly your landlord.
Day & Nite Performance Solutions offers the widest range of highest impact, most cost-effective integrated suite of technologies – products – services certain to generate the most favorable return on investment, serving as the basis for a compelling business case for your employees, guests and notably, landlord. As an essential investment in your business, proven bi-polar air ionization and accompanying highly engineered indoor environmental quality solutions delivered by the Day & Nite family of companies further solidifies a case that your smart, compelling investment in your business success merits a landlord’s willingness to (re)negotiate a lease. After all, there is no sweeter music to the commercial real estate industry’s ears than favorable net operating income; your thriving enterprise on the other side of Covid-19 is the greatest symphony any landlord would ever want to hear. But the starting point for your strategy and your compelling business case crescendo is strictly a function of what you are willing to do. Expecting a landlord to reduce rent in a business unwilling to invest in itself is unlikely to the point of unreason.
Day & Nite’s unrivaled range of high-impact indoor environmental and food safety solutions is further matched by an equally favorable assortment of financing options. To learn more about how you can best propel a business in ways that will be as meaningful to all other stakeholders as it is to you email jbf@wearetheone.com
