NAIOPWA Flash Poll Results: As Tenants Struggle, Property Owners Reach Out in Support 

NAIOPWA flash poll banner with woman in office wearing medical mask and looking at phone

Poll Results: As Tenants Struggle, Property Owners Reach Out in Support 
"We will do what it takes for the tenants to survive. Their success is our success."

SEATTLE - On April 16 and 17, NAIOPWA circulated our first “flash poll” to the region’s commercial real estate community, including members and the community at large. Over two days, 54 professionals representing property owners and developers responded to the survey, providing 119 total responses across seven asset types: office, industrial, retail, multifamily, hospitality, mixed-use, and healthcare. 

Poll results represent a snapshot of the current state of the industry, which relies on a diverse business environment that abruptly narrowed in early March. As we might expect, rent/lease payments were down in April and are expected to drop further next month. But regional CRE owners and property managers are clearly united in creative and proactive solutions to keep tenants in their properties.

The survey asked for input on: 

  • the number of tenants that paid April rent/lease fees by April 15;
  • requests for relief received by April 15;
  • expectations around May payments after more than a month of quarantine;
  • and strategies the industry is using to work with tenants.

Survey results reflect reality on the street: Retail is sharply down, and with it, tenant rent payments, while other asset types show moderate decreases. An expected deepening financial impact across the board, with trends continuing per sector, is evident as well.  Owners expect that the majority of tenants in office, industrial and multi-family properties will pay rent in May. In direct contrast, retail has taken another hit as quarantine and social distancing closed many businesses entirely. Hospitality, mixed-use and healthcare report a greater mix of rent payments in April, with a smaller number of properties represented in the survey in these areas. Mixed-use is somewhat stronger and appears to be in a better position going into May, whereas hospitality and healthcare, already reporting a spread toward fewer tenant payments, appear to be following retail in a race to the bottom.

Even as the community struggles to adjust to an unprecedented situation, CRE property holders are actively engaged in finding solutions and preparing for long-term recovery and return to business. The variability in numbers of rent payments and variance in asset types held by the survey respondents reflects the sentiment of several owners: “There is no ‘one size fits all’ solution. Conversations with all tenants are specific and relate to tenants’ individualized needs and circumstances. We are willing to work with tenants … Each solution is different.” More than 90% of respondents report active engagement in working with tenants to adjust payments, and we expect more to engage in conversations as the community seeks a way forward through the new normal. 

“In unprecedented times, new and creative solutions are required to keep the economy moving. The CRE community has taken an active role in supporting tenants,” says Tina Pappas, NAIOPWA board chair. “Our industry builds, supports and maintains an essential underpinning of our society--our physical infrastructure--and must be there to support all business activity. It is the beating heart and lifeblood to all sectors of the economy. In addition to supporting existing tenants, we are committed to safely resuming construction work in accordance with new guidance.”

Highlights from the survey appear below. Please contact [email protected] with questions.

NAIOPWA Flash Poll Results

Respondents indicated percentages for as many property types as relevant for questions 2, 3 and 4, yielding a total of more than 100 responses across all categories, with the great majority evenly spread among office, industrial, retail and multifamily.

Q1: Which asset types do you most commonly work with, develop, and/or own?
Respondents were able to select multiple options, resulting in a broad representation of the industry.

  • Multifamily: 28
  • Office: 27
  • Industrial: 22
  • Retail: 14
  • Mixed-use: 14
  • Hospitality: 8
  • Healthcare: 5
  • Other – Construction: 1

Q2: How many tenants in your properties paid rent in April?

In April, 70.8% of office, 75% of industrial and 81.5% of multi-family reported that at least 80% of tenants paid rent, and in each of these categories, several respondents reported 100% rent payments. Just two retail properties report that 80-89% of tenants paid rent in April, and five properties reported that only 1-10% of tenants paid rent.

Chart depicting aggregate responses to question about tenants who paid rent in April 2020

Chart depicting tenants who paid rent in April 2020 by asset type

Q3: How many tenants have approached you regarding rent reduction or relief?
Responses to this question reflect a nearly exact inverse of tenants currently paying rent. Slightly fewer tenants have asked for assistance compared to the numbers who haven't paid rent, perhaps an indication of the proactive work of property owners to reach out to the tenants with support and solutions.  

Q4: What percentage of tenants in your properties do you expect to pay rent in May?

A universal decline is expected in May, with retail most severely impacted and the stronger categories creating a buffer across the industry as a whole, likely due to the high numbers of tech workers in our region who are working from home and therefore supporting corporate income and rent payments.

Chart depicting tenants expected to pay rent in May 2020 (aggregate) 

Chart depicting tenants expected to pay rent in May 2020 by asset type


Q5: What strategies are you likely to employ immediately when working with your tenants? Select all that apply. (54 respondents; 158 responses)

About 60% of property owners report providing adjustments to term (extending term in exchange for rent relief), and more than half may make adjustments to rent (lower rent or free rent periods); nearly two thirds are requesting financials and/or proof of distress from tenants. Only 7.4% of owners reported being only "unsure" about adjustment strategies. More than 90% are actively discussing strategies to help maintain cash flow through this period and set us up for recovery. In particular, the strength in office tenant rent payments indicates that even in our tech-heavy region, companies see value in providing dedicated office space for employees.

Negotiated adjustments noted by comments include rent deferrals with repayments over a set period, generally 6-12 months; labor exchanged for rent; and suspension of rents to July. “All options are being evaluated, depending on the needs of the tenant,” per one respondent, and “everything is a case-by-case situation,” wrote another, indicating that owners are working directly with tenants to adjust and resolve issues to the benefit of both parties. Question six shows the many creative ways property owners are working to ensure tenants succeed in the short term to protect both the tenants and their own investments in the long term.

Chart depicting responses to question about strategies used to help tenants pay rent 

Q6: If possible, please include additional detail around what you are considering offering or currently offering tenants. (22 responses)
Many owners are offering tenants the option to reduce payments up front, with the value repaid over the term of the lease and/or a set period, sometimes extending the lease. Expectations for repayment vary, with the comment that “each solution is different” speaking to the customized, detailed efforts the community is making to work with tenants. Ultimately, the comment “We will do what it takes for the tenants to survive. Their success is our success,” speaks for the overall commitment of the CRE community to work together to emerge into the “new normal” economy post-COVID-19,

Comments are lightly edited for clarity.

General comments

  • There is no “one size fits all” solution. Conversations are specific and relate to tenants’ individualized needs and circumstances. We are willing to work with tenants that can prove their distress financially, as well supporting their plans for the future and/or their suggestions for rent deferral. Each solution is different.
  • We understand the slowdown. We need the economy to at least idle, not shut down. We will do what it takes for the tenants to survive. Their success is our success.

Specific strategies

  • Technology to support remote and reduced human interaction at reduced prices
  • Invoice tenants for full amount, waive fees, and make them aware they can apply for federal assistance
  • We are giving some tenants the option to use their security deposit as rent, with a no-interest payback for several months. 
  • Offering deferrals if tenants can prove they have applied for government programs and can prove financial distress
  • For a small subset of tenants, we will consider short-term partial rent deferral or "blend and extend," with abatement in exchange for adding significant term to the lease (i.e., 2 months abated for 2-3 years of additional term).
  • Greatly reduced or no rent for the short term (2-3 months) with that rent value spread out over the remainder of their lease term. This seems like a good compromise that many tenants are happy with.
  • Abated rent period to be paid back in early 2021
  • Deferral, with amortization of balance at zero interest for an agreed-upon number of months or over remaining term of lease
  • Industrial: 3 months 50% rent reduction to be paid back in 2021
  • We have offered a 50% reduction in the base rent for our industrial tenants. 40% took us up. 
  • Depending on tenant, we are either abating rent for a 3-month period or deferring it for a 3-month period with payback over two years. All with permission of lender and formal lease modifications. No reduction in NNN.
  • 30-, 60-, and 90-day deferment options 
  • Rent deferral to be paid by a specified date
  • Pay an agreed percentage (25%-75%) of base rent plus 100% of OPEX for an agreed-upon period of up to 8 months. Full rent then resumes and deferred base rent is to be paid back over an agreed-upon timeframe. We won’t be surprised to see many of these redone for the retail tenants.
  • Retail: 3 months free rent with addition to end of lease term. No write-offs expected. 
  • Rent deferral but pay for NNN
  • Rent deferral that is amortized into rent during 2021
  • Multi-family: Payment plans with current rent added to future payments along with extending lease term. Some write-offs expected.
  • We are allowing multi-family tenants to break leases if they were laid off.
  • We ask them to pay what they can and come up with a payment plan that works for them. We'll see how bad May looks. Ideally, once they are back to work, we will forgive the back debt in exchange for a new lease.
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