The lockdowns and movement restrictions in cities have put construction projects on pause. Such short-term impacts are only the beginning. For many construction companies and their clients, there is now a need to revisit the contracts they signed during the start of their partnership. How will the new normal change the business operations? How can an enclosed commercial, mall-type building be functional and profitable under the new normal? Under the guidelines of the government, enclosed spaces are a no-no because of the rapid transmission of the virus. So how can office and commercial buildings shift according to these changes?
Today’s commercial construction industry is in limbo. Some construction projects have stopped. Sites are dormant. Strict health and labor restrictions are making it hard for workers to go back to their jobs. The global supply chain has been disrupted. Project milestones have been missed. Experts predict that there will be more negative repercussions in the future, with financial impacts and contractual disputes smacked in the middle of them.
Change in the Business Profile
Commercial buildings such as office and commercial rental spaces will never be the same again. The construction industry has to change the way it does business. For the past decade, companies have been shifting to a more flexible work-from-home setup. They haven’t been needing large office spaces for their businesses since they’re doing two things: letting their employees work from home and outsourcing employees from third-world countries.
The pandemic is fueling this setup. Companies have realized that they can cut losses and operational expenses by simply letting their employees work from the comfort of their own homes. The decentralization of offices has been gathering speed the past few years, it is more so important these days. It has actually been a tool for attracting and retaining talent.
The weaker demand for office space will have to play into the equation. What will office buildings do now that they have a smaller market? One, they have to downsize the office units. Two, they have to implement sanitation devices in the building and install air purifiers. Three, they have to follow physical distancing measures and adapt to the new normal of business operations.
It might be time to review those contracts you let your tenants signed. The pandemic is forcing all industries to look at the way they do business. You can renegotiate rates and payment schemes to allow your tenants to stay. Remember that because of the economic insecurity, it won’t be easy to find new tenants, too. People are basically just surviving. If they are to start a new business, they’ll do that from their homes and not rent an office space.
Building owners should also contact their insurance agents and see what their policies can do for them. Your broker should guide you through the requirements that insurance companies have imposed on claimants. Hopefully, your contract has a policy on the impact of infectious diseases on property. Many insurance companies have clamped down on these claims.
No business is safe from the effects of the pandemic. These effects aren’t only for the short term. If you own a rental space, you are in for an uncertain future for the next couple of years. The world is going into a deep economic recession. The only way to survive is to find means to swim with the current.