COVID-19: State of the Occupier Update - Lisbon

Most office occupiers are working from home, though a few companies are rotating their staff in the office. We expect to see physical occupancy levels below 15% considering that rotations are being done with roughly 85% staff working from home.

The most challenging situations for occupiers with contracts under negotiation have been completing deals on time when the landlord is paying for fit-out construction and the tenant is delivering. We see landlords and tenants doing their best to cooperate. For existing leases, tenants are trying to manage cash outflows and asking landlords for rent-free periods. For now, landlords seem to be reluctant to grant these.

OCCUPIERS?

Occupiers without time pressure are avoiding making decisions, and many are seeking rent relief or abatements from landlords. Occupiers are increasingly rethinking their space needs as they consider alternative work strategies.


LANDLORDS?

Most landlords are taking a “wait and see” approach as developers look to minimize risks on delivery timing. There is a general sentiment of uncertainty, and we expect rents to stagnate or trend downward near term.


DEVELOPERS / INVESTORS?

There is some room to negotiate better terms as leverage shifts to tenants and away from landlords, where it has been for the last two years. Tenants will likely be able to command greater tenant improvement allowances in buildings where vacancy is on the rise. Occupiers should review their space requirements based on any changes because of a more permanent use of work-from-home flexibility. Force majeure clauses are being put in place to protect both occupiers and landlords from impacts of the pandemic. Occupiers can reduce some delivery risks by working with landlords to deliver space in stages, providing some space as "temporary" and then fitting-out the remainder of the space as the situation grows clearer.

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