The COVID-19 pandemic continues to cause multiple disruptions to the world’s industries and economies and this is also true for many CEE currencies. Those countries that have not adopted the Euro, or are not pegged to it, have each seen a ca. 10% depreciation in currency value during the period February to March 2020. The Romanian Leu is the exception which has depreciated just 1%, largely due to central bank intervention, Colliers reports in its CEE Special Insights Series.
As the majority of leases in CEE are denominated in Euros, this comes as an additional strain to occupiers, particularly those whose income is largely collected in local currencies (CZK, PLN, HUF & RON). On top of the forced or voluntary operational closures for retail, F&B, entertainment, hospitality, offices and some manufacturing and production facilities, to safeguard people’s health, this puts both landlords and tenants in a very unfortunate predicament.
This is indeed uncharted territory, as the pandemic and subsequent states of emergency are restricting ‘business as usual’ for so many individuals and businesses. Therefore, reaching a mutually ‘best of a very bad situation’ compromise is surely one way to help protect all of our interests in the long run. On the one hand, landlords will understandably want to collect their rents to protect their investments and on the other, occupiers will want to focus on securing the future of their businesses and people. In almost all real estate sectors, a future where properties have no businesses to occupy them and where businesses have no properties to operate from does not paint a very good picture for anyone.
“Loan repayment holidays and/or other financial measures, including government aid packages across the region are hopefully in the making and until these are more clear, it is essential that we find workable solutions that will work alongside these, assuming of course that whatever support is provided, it will not provide a ‘miracle cure’. Rather than go headfirst into legal disputes over payments, we are seeing the first cases of landlords considering short term rental holidays or bringing forward any contracted rent-free periods (typically added at the end of a lease). In return, tenants could be expected to increase their lease lengths by the compromised period or more,” Kevin Turpin, Regional Director of Research | CEE at Colliers International concludes.
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