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  • Writer's pictureChloé Rayssac

[Podcast #1] How has Covid impacted the landlord/tenant relationship?

Updated: Sep 11, 2023

In this first podcast of our program "Parlons Tertiaire", broadcast on Radio Immo on January 29, 2021, Chloé Rayssac and Johanna Zilberstein welcome Adrien Berenger, Director of Asset Management at Union Investment, to talk about the crisis and the decisions taken within the teams.

(Audio only available in French)


Chloé R:

At the beginning of the pandemic, especially during the first lockdown, what directives were given to the teams on the ground? Was there a common directive with the establishment of commissions, or was it more flexible and handled on a case-by-case basis?

Adrien B:

Union Investment is a company with a predominantly Paris-based portfolio, consisting of large office and commercial buildings, residential properties, as well as other assets such as shopping centers and hotels managed from outside France. When the lockdown was imposed, we had to assess the extent of the crisis and adapt our methods of managing the portfolio. The shift to digital communication led us to understand the evolving situation influenced by ministerial and presidential decisions. We focused on understanding the expectations and challenges faced by our tenants and partners, identifying those most vulnerable and already expressing economic difficulties, or requiring some form of action from our side. We worked to consolidate these requests to have a comprehensive view of our portfolio in France.

Subsequently, we shared this information with our parent company in Germany, where our ability to address these issues was considered at a global level. We conveyed this information with conviction, relying on our day-to-day relationships with various clients and partners. After gaining a good understanding of the evolving situation and the perspectives of major tenants and landlords, we sought to find the most sustainable approaches based on the characteristics of the companies and funds we manage. Many of our funds are retail-oriented, which means dealing with small investors who may not have the same capabilities to respond to user demands. Hence, we had to be mindful of what we could realistically do.

Our decisions were based on our relationships with tenants, our convictions, and the financial information provided by them. Whenever we received a request, we asked for the financial statements of these companies to confirm whether their situation had indeed deteriorated. We requested profit and loss statements, balance sheets for previous years, and sometimes attestations from our tenants' accountants to verify if there was a significant economic shock in their financial situation that warranted our assistance. Consequently, we were able to support a number of our tenants facing the most complex financial situations that required involvement from our teams.

Throughout the crisis, we aimed to be attentive and adaptable, even though, at that time, we all anticipated a swift return to normalcy. However, reality proved otherwise, and we had to readjust. The underlying principle was flexibility, agility, and good communication with our parent company.

Chloé R:

Following the second lockdown in November, how did the teams' attitudes evolve? Was there a significant shift? Did the discourse change?

Adrien B:

For us, the first lockdown was more challenging than the second. The initial lockdown was a discovery, often accompanied by fear for the future. The market was volatile, and there was a sense of urgency to take immediate action. The societal pressure was intense, and the total lockdown was an anxious experience since it was unprecedented. The discussions during that period were sometimes quite intense.

Between the lockdowns, many of our office-oriented tenants adapted to remote work and managed the intermediate situation positively. As a result, the second lockdown was better received by our tenants. It was also better experienced by the Union Investment teams. Overall, we believe that we handled the second lockdown better. We also got to know each other better during this period, and our approach to handling requests became more tailored, resulting in fewer demands during the second lockdown. Companies had learned to adapt to the situation.

We actively engaged in intelligent cost-reduction measures, addressing evident needs such as tenants wanting to reduce their office space. We were able to assist tenants in these efforts between the first and second lockdowns, remaining active during this period. Hence, I believe that we managed the second lockdown better as everyone was better prepared, and we were able to activate certain key success factors.

Chloé R:

If you had to summarize the changes in interactions with tenants in one word, what would it be?

Adrien B:

Flexibility. Many companies are considering reducing their office space to cut costs. The trend is visible as most companies are adapting their policies to accommodate remote work, including considering flexible office spaces, all with the goal of cost reduction. Although not all companies are heading in this direction, we have noticed an increase in requests for space reduction, sometimes ranging from 10% to 30%. These requests are often made well in advance, but life's circumstances might not always allow us to respond immediately. We are working to find intelligent financial agreements to support tenants, when possible, sometimes by relocating them within our portfolio. Larger property owners may have available spaces elsewhere in their buildings, which allows them to retain clients they value and have supported. The current year has seen a genuine acceleration in property management policies, with a shift from passive to more active approaches. Perhaps the Parisian market is now a bit less tight compared to 2019 and 2020 when vacancy rates were very low, providing more flexibility to meet market expectations in the coming months.

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