How COVID-19 Impacted Office Lease Negotiations?
GLOBAL – Working from home (WFH) became the default work arrangement during the COVID-19 pandemic, prompting businesses to refocus the purpose of the office to become a central hub for collaboration and training. In turn, this has impacted certain aspects of lease negotiations and lease provisions, according to an article published by Thomson Reuters Legal Solutions on Wednesday morning (8 September, SGT).
It said that amidst the new market situation, the needs of occupants have changed, with some office lease considerations becoming the most crucial.
These include capability to alter office space, scale down or shutter operations, or sublease a portion of the workspace. Occupants also want to be granted rent abatement or deferment if the government implements workplace restrictions, such as occupancy caps and branch closures, in addition to being able to modify office configurations to comply with health-related regulations like safe distancing rules.
Another important factor for tenants is whether the landlord can adapt building infrastructure to address public health crises. These include availability of health screenings, provision of improved cleaning & sanitization of common areas, as well as enabling social distancing in elevators and commons areas.
“Prospective tenants are looking for increased flexibility in running their business operations so they can quickly respond to future health crises or other public emergencies. Tenants want the ability to easily adapt to new conditions such as modifying office layouts or installing supplemental air filtration systems,” said Thomson Reuters Legal Solutions.
As such, tenants are expected to want changes in their office lease provisions, such as widening the scope of force majeure provision to include pandemics or other public health crises. Other office rental terms expected to be impacted include those pertaining to alterations, operating expenses, assignments and subletting, as well as rent abatement clauses.
“Going forward, landlords and tenants should carefully negotiate several sections of their leases to better protect themselves against future public health crises,” added Thomson Reuters Legal Solutions.