Permitting delays. Hang-ups in the supply chain that slow tenant fit-outs from weeks to months. These are just two of the issues plaguing tenants in the COVID environment. But there are solutions.
According to Oyku Hanna, the Verity Commercial top producer specializing in landlord and tenant representation, the pandemic only exacerbated many already-existing challenges. In permitting alone, she reports, the super-heated Fairfax County market clogged the permitting process long before the pandemic struck. Today, those delays have been magnified, and what once would take four to six weeks now stretches out as long as six months.
Then there’s the domino effect. “Tenants and landlords can’t negotiate terms until the permitting is completed,” says Hanna, who describes the delays as “unprecedented.” Delays in permitting also tax the schedules of architects, resulting in an inability to get blueprints off–or even on–the drafting table. The same is true of the construction and related trades. One tenant she knows of has been waiting six months for the installation of their heating, ventilation and air-conditioning (HVAC) system. The problem is especially acute in retail, says Hanna, who trades in that sector as well as in industrial.
First, it is essential to understand that, despite headlines of doom and gloom, the retail sector has been faring well through the pandemic, especially in the Washington, DC metro area. “However, there have been setbacks with the omicron variant on the rise. So long as the variant continues to spread throughout the region, it will be a challenge to truly determine how the DC area retail market comes out of the pandemic,” says Hanna.
“Many of the tenants I assist are family-owned, entrepreneur, or independent businesses,” Hanna explains, and they seldom have the extensive resources of larger institutional players. A couple of months of free rent is always a perk, no matter the tenant’s size. But that offering could be a game changer for those small to midsized businesses as the permitting and material delays eat into precious cash.
There are, of course, ways for savvy professionals to work through the system. Hanna points out that one of the positives that came to light in the past year-and-a-half of forced shutdowns was a better insight into “which landlords understand and are willing to work with tenants in trouble. Some will even give six months” of free rent in order to secure creditworthy tenants.
One of the hallmarks of Verity’s advisory approach is a close working relationship with its clients. Hanna adds the importance of education to that relationship. “Especially for clients who might not have the experience,” she says, “it’s critical to explain the process each step of the way.”
Ditto her relationships with her landlords, no matter the experience. “You can say ‘no’,” Hanna says, meaning that you can reason with the stakeholders in the transaction to come up with a solution that guarantees mutual success. The earlier all those involved know what the path to occupancy will be, including all of the bumps and delays along the way, the better informed and the better prepared they will be.
With confidence that the key players are on board and on the same page, she often approaches the other participants–the architects and contractors–to get them queued up for the project before permits are in hand.
It’s a holistic approach, one that is innovative in its leverage of current leasing issues to forge stronger relationships with all the involved players.
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