Renegotiations in Hawai‘i’s Commercial Real Estate

Commercial real estate has had landlords and tenants working together across the state to make it through the past year. Now they are renegotiating how to work together in the future.

Pacific Business News, April 2, 2021

Last year, COVID-19 restrictions cut revenue for shops and restaurants.

These companies and their landlords came up with different ways to deal with this, knowing that it would be difficult to pay the rent.

According to the commercial real estate agents Pacific Business News spoke to, the COVID-19 experience is changing the terms of commercial leases that are currently being signed or renewed.

These changes are all attempts to answer “what if” questions.

What if this doesn’t end soon? What if it happens again?

Jessika Fodor, principal agent for JFodor & Co., says that some leases are negotiated with percentage triggers, so if business declines, lease payments will also be canceled.

For hotels, these triggers are tied to occupancy rather than revenue. Fodor says this arrangement has been part of every conversation she has had lately.

Other brokers at our round table say they have seen the same changes in industrial and office leases.

Office tenants specifically seek protection when, for reasons beyond their control, they cannot actually use the space they are renting.

In some commercial leases, force majeure clauses are changed to identify pandemics as the type of “act of God” event that would allow a renter to step away from the lease entirely.

Even small details have become big deals.

Wendell Brooks III, executive vice president and head of Hawaii Brokerage at Jones Lang LaSalle (JLL), says well-appointed amenities like dedicated parking for customer pick-up will be mandatory.