The quarantine decreed with crisis in São Paulo, Rio de Janeiro and other cities in Brazil is already affecting the rental market real estate. Although tenants and landlords are concerned about the lack of revenue resulting from the closure of stores and establishments and the restriction on the movement of people.
However, one emerging solution is tenants seeking agreements that can reduce this impact. This alternative is even being encouraged by real estate agencies.
Businesses closed, rent lower Businesswoman Junia Pereira, owner of a clothing store in Pinheiros, in the west zone of São Paulo, realized a few weeks ago that the coronavirus crisis would significantly affect her business.
So when the city hall decreed that businesses would be closed starting Tuesday (24), she was sure she would need to negotiate an agreement with the property owner. “I don’t do online sales, only in person.
"Revenue is going to drop significantly, so I prepared myself and already opened a line of communication with the owner," says Junia, who has occupied the same two-story house on Rua dos Pinheiros for four years. The owner said he's willing to negotiate, and Junia is preparing the offer.
Paying rent is for later
"Most companies will face acute cash flow problems. They'll need to pay employees and bills. They'll postpone paying rent for later," says Alberto Ajzental, coordinator of the Real Estate Business Development program at FGV.
According to Matheus Fabricio, executive director of Lopes, a real estate agency that works with commercial and residential rental crises throughout Brazil, many tenants have already contacted the property manager to negotiate rent.
The greatest demand, for now, is from commercial real estate users—three out of every four requests, he estimates. "Those who are looking are small and medium-sized businesses, who have had their businesses closed and are worried.
I think it will also happen in the residential sector, but later. It's still very early." Fabricio emphasizes that, despite this common profile of small and medium-sized business owners, there are already requests for a new agreement from all types of entrepreneurs, across all sectors.
“There are people who have a micro-business and are renegotiating a rent that costs R$1,000,000, as well as entrepreneurs who pay R$1,000,000 and already have a more established business.”
Types of crisis agreement
According to the Lopes director, tenants' rent proposals are varying between three formats. One is from business owners who are unwilling to negotiate and simply state that they will not pay the rent during the quarantine.
"Although it's a minority, a small one at that, who act unreasonably," he says. But there are those who come forward with a proposal, usually a rent reduction of around 50%, for a period ranging from 30 to 90 days. So, "it depends on the person's level of anxiety and concern about the crisis," says Fabrício.
According to him, this is the most common settlement proposal made by tenants. Another significant portion, he says, are from tenants who prefer not to pay anything now and simply spread out the payments over the next few months, until the end of the year, without receiving any discount.
In short, according to Fabrício, this option is offered by business owners who have other debts to pay and prefer not to pay any money during this period of uncertainty.