3 Questions To Ask When Looking For Pandemic Proof Commerical Tenants

From negotiating rent breaks to tenants going bankrupt, if you’re a landlord during this time you’ve likely been hit in one way or another by this pandemic. Your once stable real estate investment may be in trouble. However, there are a few tenants that may be deemed “pandemic proof” coming out of this. Here are some things to consider when looking for new commercial tenants or evaluating your next commercial investment:

1) Is the tenant deemed an essential service?

We’ve talked about The Real Estate Trifecta before (grocery stores, liquor stores and pharmacies) as these types of tenants have become a lifeline for Canadians during this time and have remained open since day 1. On top of that, they are experiencing record highs for revenues. According to CTV “some retail analysts are predicting Canada’s major grocery chains will report higher earnings per share in 2020 than in 2019.” 

2) Does the tenant have alternative revenue sources?

With so many businesses closed, online shopping has seen a major surge during COVID-19. Tenants with an e-commerce extension to their business have been able to retain revenue streams while foot traffic has been halted. According to the Financial Post, “Almost three in 10 people are shopping for things online that they normally would have bought in-store.” 

3) Does the tenant need to maintain a certain capacity to be profitable?

With restaurants just starting to re-open but at 40 – 50% capacity it is still unclear how many of them will be able to push through this pandemic. However, restaurants with alternative options to serve people such as drive-thrus are another example of how some in the food & beverage industry has been able to remain profitable. Starbucks, for example, has closed many of its stores for the last few weeks but ones with drive-thrus have remained open and are doing great business from its very loyal customer base.

While hindsight is 2020, it’s impossible to know what traditional businesses will fare well during a health crisis. As businesses continue to get creative with how they can operate safely within the regulatory framework of the “new normal”, we expect to see many new business models emerge that will also make for stable tenants should we ever face another pandemic.

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