Colliers: Almost 90% of tenants paid their obligations on time to the office buildings owners in H1, despite COVID-19

Most tenants complied on time with their contractual obligations to owners of the office buildings managed by Colliers International in the first half of this year, even though in some cases the rented spaces remained unoccupied for some time, due to the state of emergency. Thus, the share of tenants who paid their debts on time remained constant, on average, compared to the same period from 2019, of almost 90%, despite the effects of the pandemic on their activity, according to data from the property management division of Colliers International.

“Tenants of class A office buildings thus confirm the good intentions and practices in relation to the obligations they have assumed. Compliance with these obligations also comes as an effect of globalization, with companies belonging to international groups being able to continue local operations without problems as long as the parent companies have more easily withstood the effects of the pandemic. As part of their continuity plans, many companies have provisioned budgets to cover certain operational risks, so most have been able to operate with minimal impact on already contracted expenses, such as rents”, explains Alexandru Atanasiu, Associate Director Real Estate Management Services at Colliers International.

There are signals in the office market that contractual obligations, which include rent, utilities and service charge, will continue to be met and paid on time by tenants in the future, even though there are uncertainties about this sector and expectations that it will undergo major changes in the coming years, at least from the perspective of the balance between office work and home work.

Tenants of industrial spaces managed by Colliers International have also mostly tried to pay their obligations on time, although there are slight differences in the number of companies that were able to meet all contractual obligations in the first half of this year compared to the same period from 2019. If, in the case of some projects, there were tenants more affected by the current context, being forced to delay payment obligations (production facilities), in others there was an even higher rate of companies that paid on time (storage facilities) compared to last year, or even projects in which this happened for all tenants.

Tenants of retail spaces located on ground floors of class A office buildings were, explicably, the most affected in the last period. This has resulted in a decrease in the number of retailers that have been able to comply with their contractual obligations towards owners of office buildings managed by Colliers International.

“In this case, we are talking especially about spaces that have been closed recently, which put pressure on tenants and reflected on the owners’ revenues from rents. As employees return to the office, differences in the number of retail tenants who manage to pay their obligations on time may also significantly attenuate”, says Alexandru Atanasiu, Associate Director Real Estate Management Services at Colliers International.

However, owners of office spaces have been open to find solutions, together with the retail tenants on the ground floor of the buildings, so that the recovery would be as fast as possible. These included, in the first phase, deferrals to rent payments, and other concrete measures could be established in the next period, once the evolution of the market becomes clearer.

Colliers International manages a total portfolio of over 550,000 square meters of industrial and office spaces, including the office projects Equilibrium, Business Garden Bucharest, The Office in Cluj-Napoca, The Bridge, Hermes Business Campus, Stefan cel Mare Building, Art Business Center, the office portfolio owned by Adam America, the office portfolio owned by Smartown Group, Allianz Office Building Brasov and Vox Technology Park in Timisoara, as well as three industrial parks in Timisoara, Brasov and Arad and the ELI Park 1 industrial park developed by Element Industrial in the north of the Capital.

Colliers International is a leading real estate professional services and investment management company. With operations in 68 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to maximize the value of property for real estate occupiers, owners and investors. For more than 25 years, our experienced leadership, owning approximately 40% of our equity, has delivered compound annual investment returns of almost 20% for shareholders. In 2019, corporate revenues were more than $3.0 billion ($3.5 billion including affiliates), with $33 billion of assets under management in our investment management segment.