Waivers, Discounts & Termination: Tenant-Landlord Wage Tug of War

According to sources, several large firms have “a clear mandate not to come to work till end-August, September”.

Published15 Jun 2020, 06:31 AM IST
Coronavirus
4 min read

A travel aggregator platform recently served notice to vacate its 40,000 square feet office in Bengaluru and has moved into a co-working space. Nearly half the company’s staff was laid off. With pan-industry layoffs and a new work-from-home policy being encouraged, the demand for office space is shrinking.

After nearly three months of total lockdown, malls and restaurants opened to the public on 8 June, in a huge relief for mall owners and retailers who had seen business totally dry up due to coronavirus. While crowds were sparse in a few cities as customers decided to err on the side of caution and stay away, in Noida, many shops inside the mall remained shut even though people were allowed entry.

Industry members said that occupancy in office spaces was down by 50-60 % in Bengaluru this financial year. In many instances mall owners have waived rents or negotiated discounts to aid struggling retailers, who in turn had reportedly demanded a revenue share agreement instead of fixed rent. However, low footfall in malls and a slow return to physical working for companies will take a toll on the real estate demand by these sectors. However, developers remain optimistic that the work-from-home setup will be short-term.

According to industry insiders in Bengaluru, a majority of companies are functioning with only the most critical staff coming to work – about 8-12% of the total strength. Others are planning to work with a greater number of employees only post July.

“From a short-term perspective, there will be an increase in the percentage of employees working from home but this will be compensated by the increased per person space requirement, which is bound to go upwards of 20-30% per employee. From a long-term perspective, in our opinion, WFH would pose a huge challenge for corporates and employees alike due to data security, lack of collaboration and bonding, productivity and health (physical and psychological) challenges, and also due to a lack of socialising and recognition,” read a statement by Prestige Group, a property development company on the future of tech parks.

Representational image.
Representational image.
(Photo Courtesy: Embassy Group)

‘Clear Mandate to WFH Till Aug-Sept’

Several companies in Bengaluru are still using a work-from-home setup with only the most critical or required staff being present at office when needed, despite the government allowing offices to start functioning in Karnataka from late April.

Odessa, a global software development and consulting company with offices in Bengaluru has been working remotely since March with no plans to switch back immediately.

Several large tech companies based out of Bengaluru have close to no staff reporting to work. According to sources, many large firms have “a clear mandate not to come till August-end to first week of September.”

Many startups, due to smaller team sizes and less organised hierarchy have been able to make the switch more successfully.

“Most of the builders, they have given waivers and discounts. Based on their rapport and tenure with the tenants. In some cases, they are asking not to pay immediate rent, but pay in lump sum in the future 6 months. In many cases, they will try to find a client with reduced rent and use all the existing resources if the tenant insists on vacating.”
Vishwanath Seetharam, founder secretary of Outer Ring Road Companies Association (ORRCA)

‘Everyone Wants Waivers but We Also Have to Function’

Uday Garudachar, chairman of the Garuda Group said that a conclusion had been reached between retailers and mall owners to settle the matter of rent payment and fixed charges amid low footfall and lack of business.

“Everyone asks for waivers, but we have to survive. Water electric security – all that costs. We have arrived at some sort of conclusion. They asked for 75% waiver. We said we can’t survive like this. They have said till crowd improves they will pay 50%. As they improve they will pay is what they say.” said Garudachar, also the Chikpet MLA.

“Retailers selling both essential and non-essential items have reported a 40 percent and 100 percent drop in sales, respectively, due to the COVID-19 situation. There’s a whole lot of confusion and business issues even after reopening,” said Kumar Rajagopalan, CEO, Retailers Association of India.

Prestige Group, that owns and operates 9 malls across India, gave a total rental waiver for the period of the lockdown.

“Retailers are going on the presumption that there will be a compression in consumption. We believe that this is a premature and pessimistic outlook. Mall owners and retailers need to jointly work towards improving customer sentiments, and only after doing rigorous exercise in this regard and evaluating the outcomes, should we come to any conclusion with regard to how the industry should balance the needs of the retailers and mall owners,” V Muhammad Ali, COO – Retail Division, Prestige Group.

Around 75 retailers that operate 200 brands have reportedly written a letter to mall owners, stating that “revenue-share percentage should be a flat percentage depending on the category of stores”.


(With inputs from The Times of India)

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