Shared & Halved - Occupiers: Resilience & Resurgence

To support clients and colleagues working in the Real Estate Occupier community, Shoosmiths hosted a webinar on 4 May 2020 looking at some of the most pressing issues impacting the sector in light of the unique challenges posed by COVID-19.

Introduction

Coronavirus COVID-19 is a crisis unlike any other we have faced as a country, presenting a new and varied set of challenges to UK and global business. Based on what you have told us is more important to you in the current climate we have devised a series of webinars aimed at you to look at implications. In this webinar we looked at the resurgence for life and businesses after COVID-19.  Below are our key tips and takeaways.

How will we use innovation and technology to rejuvenate the industry?

• Current situation has shown us the importance of the digital economy.
• Businesses with an online presence have continued to look for new ways to interact and engage with shoppers.
• Not just about selling online but a lot of brands have been seen supporting others through Social Media and keeping their customers updated on their current circumstances.
• Examples – a flagship store is offering a virtual trip around the store to discuss products with staff members who are located within the store to assist with queries.
• Some retailers are managing to keep sales on target through the use of online platforms.
• Key for retailers is to identify their customers so they can target the right people.
• Click and collect is also having a big impact with some retailers setting up booths and pop ups to ensure they are available to their customers.

How are corporate occupiers adapting their supply chain strategies to match the current climate?

• People are looking to simplify their supply chains.
• More people are looking to source supplies from closer to home.
• Recommend identifying any weaknesses in the supply chain and to collaborate with others to ensure continuation.
• Need to mindful of waiving any contractual rights for non-compliance with contracts.
• Government has temporarily relaxed competition rules in light of the current situation.
• Some are seeing payment terms being extended whilst others are taking equity stakes to ensure the whole chain can benefit.
• Still need to be mindful of force majeure as now we know some risks can look to tailor the positions in the future.
• Always check potential suppliers’ financial information and do full due diligence so you can be aware of any issues and pre-empt possible issues.
• Operationally we are seeing more movement of stock and storing stock closer to where it is needed, so we may see retailers wanting larger sites to accommodate more storage going forward.
• Also looking at how they can be more sustainable.
• Government may look to consider increasing minimum wage to give sustainability the push it needs as this will put more money back into the economy. 

Regardless of a government directive, when will operators feel they are able to start trading and what will that look like?

• It is early days, and this is likely to depend on the individual retailers and their corporate structures as well as the location of stores.
• High streets, retail parks and factory outlets may be the first to return to the new ‘normal’ as customers can drive there and queues can be easier to manage.
• Shopping centres are likely to be the last to open due to transport and queueing concerns.
• Delivery restrictions have been relaxed and cannot be enforced in light of the current situation, but this is only for England and Scotland.
• It is likely that a dim view would be taken of enforcement in residential areas if deliveries are being made as this would be seen as assisting the community in getting supplies.
• It is possible that as we go back to the new ‘normal’, trading hours may change especially on Sundays due to the additional requirements being placed on them.
• The Planning system will need to organically relax and enforce and change with the times too.

How will employees feel about going back into the workplace and how will they be safeguarded?

• There are mixed views – some are pushing to return whilst other are struggling with anxiety, some jobs cannot be done from home.
• The best advice for employers is to communicate clearly with employees and understand their concerns.
• Carry out risk assessments based on the type of work carried out from both employees’ and customers’ perspectives.
• Risk assessments must be continually monitored.
• Social distancing and the use of PPE could form part of the new ‘normal’.
• If an employee refuses to return to work there would be the option to go down a disciplinary route or consider not paying them, however employers may be reluctant to do this as they do need to be understanding and address any concerns and attempt to work through these.

How does the restaurant industry plan to un-furlough and retain staff in the post lockdown weeks and months? And does the panel envisage the Government assisting in this process?

• We are expecting more guidance from the Government but anticipate social distancing will continue to be a major part of any plans.
• There may be some difficulties in restaurants meeting the social distancing requirements as it could not be financially viable for some to open in light of the restrictions as they can either not comply or will not raise enough money.
• Both retailers and restaurants require more support and financial assistance for both re-opening and those that cannot open.
• Permitted development rights have changed to allow places to offer takeaways where previously they did not have this right, which is assisting some businesses to remain operational.

If a member of staff subsequently contracts COVID-19, what is the likelihood of legal action, even though social distancing measures have been put in place?

• Criminal – any criminal liability would be enforced by HSE and would need to look at what measures had been put in place alongside the risks and if compliance was maintained.
• Civil – there is a general duty to take reasonable care, but causation will be difficult to prove as will proving a loss.
• There could also be an influx of constructive dismissal claim as employers need to ensure they are doing what they are required to do and maintain these.
• Best for employers to communicate effectively and maintain best practices.

Whilst you can safeguard your staff in the office through applying social distancing measures, how do you ensure their safety when travelling to work?

• This is difficult as ordinarily the travel to work was not on the employer’s watch but now they need to be more aware of this.
• Many employers may offer to make arrangements to assist with concerns being raised, such as subsidised car parking or staggering shift times, however this will depend upon what the Government guidance is updated to.

What regulations and restrictions will be placed around trading with social distancing measures still in place?

• This will depend upon where trading and how many work in that location.
• As trade is low and people are not shopping there may be a limit on the number of people in stores based on the size of the stores, but this is likely to differ between High Streets and Shopping Centres.
• It could take up to 2 years to return to the levels experienced before COVID-19 but there may now be new ways of shopping with technology used and more innovative methods released going forward to deal with the situation.
• There is also a suggestion that people may sign up to more subscription-based services rather than owning things in light of the experiences.

What will lease structures look like - will this be the advent of Turnover Rent?

• Tenants are really starting to look at turnover rent only deals to reflect the fact that if trade is not good they have to pay less.  This is now being seen not just in shopping centres but also on high streets.
• Tenants are likely to want more flexibility on leases with rolling breaks more often and shorter terms.
• Governments are aware of how important high streets are and are looking at compulsory purchase orders in order to redevelop areas and invest in them.
• Landlords are appearing to be more willing to discuss concessions and ‘pandemic clauses’, therefore we are likely to see provisions included within most lease structures to deal with COVID-19 and the current situation occurring again.
• The negatives initially seen from a landlord’s perspective relate to where they are required to get a lender’s consent, but we think there may be pressure put on banks to offer more assistance.
• There is also a push for more transparency between landlords and tenants in order to level the playing field.
• Operational COVID-19 clauses are also being introduced into leases with the main push back being on rent suspension, but some landlords are prepared to negotiate on this point in order to share the pain.
• The main COVID-19 operational clauses relate to:
  • Santa clauses pushing out completion dates during lockdown,
  • Carve outs on break conditions if properties cannot be returned
  • Carve outs on keep open clauses
  • Extensions on time to provide turnover certificates

What changes to the tax regime might the Government consider to help rejuvenate the high street?

• Hard to say for certain and the Government has already done quite a lot to try and assist, therefore we are not overly optimistic as there may not be much further scope to assist but it will all depend on how the recovery progresses.

The pledges the Government has made for the rejuvenation of high streets.

• In addition to rates holidays, there are more discussions ongoing to carry out further reforms such as online taxes rather than rates to ensure that those with properties are not unfairly disadvantaged.