Dubai: Not every landlord in the UAE’s private sector space is saying “No” to tenant requests for a rent waiver. In fact, some of them are starting to match what government-owned and government-affiliated entities are extending to their commercial tenants.
These private landlords are now moving away from rent deferments for April and May to actually waiving rents for that period, as the full extent of COVID-19’s impact on their tenants become amply clear to all.
Kesavan Muraleedharan, Managing Director of SFC Group, which operates restaurant brands such as India Palace, is among the lucky tenants. In late June, he managed to win a six-month rent-free package from two of his landlords in Dubai and Abu Dhabi.
“The restaurant business has to be one of the worst affected categories after COVID-19 struck,” said Muraleedharan. “By June, everyone in the industry was of the opinion that any recovery would be extremely slow – and that the recovery needed landlords to help businesses out.
“We placed our projections of expected revenues to the landlords of our flagship locations – and that’s when they allowed the six-month rent-free with retrospective effect from April.”
Not just that, once the current leases on both locations – at Garhoud in Dubai and Al Salam Street in Abu Dhabi – expire, the renewals will come with a 40 per cent rent reduction.
“The UAE Government is doing its best to overcome the situation,” said Abdullah Mohammed Sultan Al Owais Al Suwaidi, who owns the building where India Palace is located in Garhoud. “As landlords, we too have a responsibility to support our tenants… and make sure they survive.”
A few lucky ones
Muraleedharan rates himself as being lucky in getting rent relief at two of his key locations. He has had to shut down five of the smaller ones, leading to job losses for around 100 people attached to them.
“In the restaurant industry, rents and wages typically make up for more than half of the operating cost,” he said. “With the support we had for the two flagship locations, we can save 10-15 per cent on the operational costs, and that right now is significant. It helped that with both these landlords, we had a two-decade long association. That mattered.
“But there are other F&B owners who are quitting the business because their cashflow is just not adding up – and they see shutting down as the only way to end up not losing more money.
“The restaurant business is encountering some exceptionally difficult circumstances…. Rent relief is one way to help.”
A big statement
On Monday, one of Dubai’s leading landlords confirmed it will extend rent relief of three- to six months for commercial tenants at its properties. Dubai Developments, which owns Baniyas Tower and the Blue Tower on Shaikh Zayed Road, said the move will benefit up to 1,500 tenants.
Emaar last week told its mall tenants that its current relief packages will be extended for a further two months, effective from July 1. The initial rent ‘Relief Policy’ was applied between April 28 to June 30.
In the latest notice to tenants, Emaar Malls said: “Pro-rated amounts of the rental cheques submitted, or rental payments made by tenants corresponding to duration of the extended relief will be credited to the tenant’s account with the lessor.
“We will continue to monitor the current situation, and we will spare no effort to provide more support to our tenants, to the extent possible.”
Another Dubai entity, wasl Properties, too has lined up rent relief measures, according to market sources.
“The likes of wasl have a decisive influence on the local property market, more so as their rental portfolio is spread across Dubai,” said a market source. “When government-owned landlords are showing the way, it’s likely that private landlords will follow suit.
“Maybe, they won’t be able to match what the government can offer, but even partial relief can help tenants try and manage their costs.”
But will other landlords pitch in?
Across Dubai and other emirates, commercial tenants have been in constant talks with landlords to try and convince them of rent waivers and, if not that, immediate rent reduction.
Tenants have complained that some landlords are trying to put off these discussions until the current lease term expires.
“By then it could be too late for a lot of businesses,” said one jewellery retailer. “The need for rental support is now… not after the current lease term expires. Even cheque deferments will not be of much help – only straight out rent relief will do it for us.”
Other tenants say that landlords have stopped taking their calls altogether. “At such a time of crisis, many are in no mood for any sort of give-and-take,” said the owner of an F&B brand. “We have had these locations for years now… but now, the landlord and his representatives are beyond reach.
“It’s not helping matters.”
"This has prompted many companies to upgrade their office location or size," Emrah Yar, Head of Commercial at the firm. "We have had a number of companies contact us about renting an office in Downtown Dubai as opposed to their current office space in Business Bay because they will be paying slightly more for an office in a prime location than their current office and be closer to their clientele."
