The weeks-long lockdown is pushing restaurateurs and retailers further into financial crisis. Rent concessions are one way to help them survive. But property owners who depend on monthly payments are increasingly speaking out and feel left to fend for themselves.
“Restaurants and retailers receive government grants even though, during lockdown, they can at least partly continue selling. Property owners, however, receive nothing,” says Eckhard Brockhoff. The commercial property agent from Essen says his database contains information on around 18,000 owners across Germany, giving him a good overview of the sector, particularly in the Ruhr region. Brockhoff senses growing frustration among owners. Retailers, especially chain operators, are cutting rents one after another, paying under reservation or suspending payments altogether. “It is striking that individual shop operators are currently the most reliable tenants,” he observes. “Even when property owners hire a lawyer, the situation remains entirely unclear because court rulings on the issue vary widely.”
What happened? A law came into force at the beginning of the year allowing lease adjustments during the term of a contract. The federal government intends to cushion the effects of lockdown. Restaurants have been closed since 1 November 2020, and large parts of retail since 16 December. It was only from mid-March that shops could reopen on a limited basis by appointment and, more recently, on presentation of a negative coronavirus test.
“The legislative amendment has enabled negotiations over rent during the contract term and shifted the risk of losses to landlords,” says Werner Weskamp, Managing Director of the state association Haus & Grund Ruhr. “Landlords naturally want to keep retailers and restaurants in their premises,” says the lawyer. Weskamp observes that, as the coronavirus pandemic continues, more tenants are seeking legal advice from Haus & Grund because they depend on the rental income.
Essen agent Brockhoff agrees. “On average, half of properties with ground-floor retail units belong to private individuals, families or communities of heirs. The other half are owned by institutional investors,” he says. “Property owners often use rental income to supplement their pensions. They live on it.” What particularly angers Brockhoff is that “these owners have no lobby representing their interests to the federal government.”
Werner Weskamp therefore proposes a relief fund to help non-institutional property owners through this difficult period. Haus & Grund is also calling for greater transparency. “Both sides have to reach an accommodation. That also means retailers and restaurateurs should disclose their financial figures,” says Weskamp.
Both experts expect the pandemic to leave a clear mark on townscapes. “The dangerous period will begin when struggling businesses have to file for insolvency again,” says Weskamp, referring to the temporary suspension of the obligation to file insolvency proceedings. Haus & Grund also sees structural change as an opportunity, even if many businesses close. Weskamp says: “If some retailers and restaurateurs give up, there is at least the prospect of converting stores into housing, provided no new commercial use can be found.”
Property agent Eckhard Brockhoff expects a different scenario: “I expect many retailers to close. On the other hand, the restaurant trade will boom from summer onwards, once more people are vaccinated. People want to go out again.”