Worries commercial vacancy problem could escalate

Call for rent flexibility and forbearance for otherwise viable businesses bearing the brunt of Covid-19.

Welcoming a new voluntary “Code of Conduct Between Landlords and Tenants for Commercial Rents”, Chambers Ireland has called for flexibility and forbearance in the business community if local businesses are to weather the Covid storm.

Without this spirit of flexibility, the commercial vacancy problem that is impacting local economies in cities and towns could escalate, it warns.

“The commercial vacancy problem that already damages the local economies of our cities and towns could escalate if landlords and tenants do not engage with each other”

“Everyone in the business community will need to demonstrate flexibility and forbearance if we are to limit the long-term economic effects of this crisis,” said Chambers Ireland CEO Ian Talbot.

“Throughout this crisis Chambers Ireland has argued that ‘those who can pay, should pay’ and we continue to reiterate this. But this needs to be complemented with a realistic and pragmatic approach from all creditors, and particularly landlords that have tenants that are struggling to meet their obligations.”

Liquidity effects

Talbot said that the domestic economy is bearing the brunt of the economic impact of Covid-19 and said a large number of otherwise viable businesses may become insolvent as the impact of unpaid invoices reverberates from creditor to creditor.

“Everyone will be poorer if businesses, that would otherwise be viable, are forced to avail of examinership, receivership, and liquidation”

“Liquidity effects will see many individual businesses struggle during this crisis, but the broad sectoral effects may mean that the commercial vacancy problem that already damages the local economies of our cities and towns could escalate if landlords and tenants do not engage with each other to ensure the sustainability of both parties.

“It is essential that both landlords and tenants should act reasonably, swiftly, and transparently in finding a sustainable solution to this temporary crisis and all parties should act in good faith. A key element of this will be to ensure any scheduled repayment of deferred rent will not compromise the ability of affected tenants to recover from the crisis.”

Talbot pointed to the Department of Finance’s presentation to the Irish Fiscal Advisory Council noted that “some firms/sectors [are] potentially not viable with social distancing”, suggesting that whole classes of industry are now under threat.

“This is likely to make finding replacement tenants a challenge, particularly if a failure to control Covid-19 leads to repeated cycles of restrictions and re-openings.

“Where tenants and landlords fail to engage in the manner suggested by the Code of Conduct, both sides are likely to experience the worst outcome for their businesses. Everyone will be poorer if businesses, that would otherwise be viable, are forced to avail of examinership, receivership, and liquidation,” Talbot warned.

By John Kennedy (john.kennedy3@boi.com)

Published: 1 October, 2020