Bath Property market - Leases in a post covid world

The world of commercial property after Covid 19 is likely to be very different. As we edge our way out of Lockdown both tenants and Landlords will be wondering what the future holds. How will office demand be affected by social distancing, is the 2 metre rule here to stay or will it be reduced to allow for greater flexibility both socially and commercially. What is certain is that there will need to be greater flexibility from both Landlords and Tenants, employees are likely less enthusiastic about travelling into work on crowded trains and busses and there is likely to be a greater demand for working from home.

Unless the current rules on social distancing are relaxed, the duty of care owed by employers towards their employees will require them to put in place measures to enable the 2 metre social distancing rule to be observed and to minimise the risk of transmission by avoiding sharing desks, phones and other equipment. Working environments will need to be adapted to allow employees greater personal space whilst removing shared equipment.

The reaction of some businesses may be to increase personal space to allow employees more room, whilst in other cases having more single occupancy rooms may be the answer.

Whilst negotiating new leases tenants may want to consider including specific Covid clauses into the lease which allow for rents to be suspended if another lockdown is put in place. Whilst Covid provisions may not be welcomed by Landlords, with the balance of negotiations having moved in favour of the Tenant if a Landlord is looking to fill their building then there may need to be some flexibility on the terms of the lease.

With a large supply of serviced offices, the commercial property market in Bath is likely to see an additional twist since hot desking is no longer seen as an option, the danger of sharing an office space with people who you have no knowledge of or control over may well cast a shadow over the future viability of serviced offices. If serviced offices are to survive, deep cleaning and social distancing rules will need to be enforced to minimise the risk of transmission.

The Lockdown has shown that a greater use of IT can create more flexibility in the workplace, greater use of home working allows more flexible working hours so the number of people in offices at any one time may well fall which in turn could reduce the overall office space requirement. Reducing demand for office space will no doubt find its way through to the pricing structure but as always in the world of commercial property, the overall quality and flexibility of the office space are going to be the key in determining its value.

In manufacturing and industries where people cannot work from home it may be that the cost of implementing social distancing requirements will encourage manufacturers to introduce more automation into the workplace. This may bring about the benefit of increased productivity but in the short term increased use of automation may well reduce the number of jobs.

For Landlords, keeping buildings occupied is likely to be their biggest concern. Having weathered the storm of Covid 19 and with a brief period of accepting reduced rents, most Landlords will now be looking for rents to return to a commercial footing. In multiple occupancy buildings the Landlord is likely to have obligations requiring them to maintain the common areas which will increase service charges as Tenants will be looking to the Landlord to ensure that these areas are kept as free from risk as possible and regular deep cleaning will be required to minimise the risks of transmission.

For both Landlords and Tenants, the future is likely to require greater flexibility on both sides. It is likely that the impact of the changes brought about by Covid 19 will outlast the virus itself but ultimately may almost by default create a better working environment.

For more information on this topic view our Battens Commercial Property services or contact Anna Austin anna.austin@battens.co.uk