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Oregon Governor’s Executive Order and the Real Estate and Construction Industry

March 25, 2020

Overview

These continue to be very unusual and challenging times. With the Oregon governor’s announcement of the “Stay Home, Save Lives” executive order, many businesses are significantly affected and are feeling a great deal of uncertainty. Below is a general update addressing several questions relating to the Real Estate and Construction industry.

Summary

Governor Kate Brown issued Executive Order No. 20-12 (the “Order”), entitled “Stay Home, Save Lives” on March 23, 2020. Governor Brown’s Order requires (in relevant part) individuals to stay at home or at their place of residence, except for “essential travel to or from a home, residence or workplace; for obtaining or providing food, shelter, essential consumer needs, education, health care or emergency services; for essential business and government services; for the care of family members, household members, elderly persons, minors, dependents, persons with disabilities, or other vulnerable persons, pets or livestock; and travel as directed by government officials, law enforcement, or courts; and other essential travel” (sections 1, 22).

The Order also closes the following retail establishments effective March 24: 

Amusement parks, aquariums, arcades, art galleries [except by appointment]; barber shops and hair salons; bowling alleys; cosmetic stores; dance studios; esthetician practices; fraternal organization facilities; furniture stores; gyms and fitness studios (including climbing gyms); hookah bars; indoor and outdoor malls [except to the extent they are open for provision of essential services, such as grocery stores and pharmacies]; indoor party places (including jumping gyms and laser tag); jewelry shops and boutiques (unless they provide goods exclusively through pick-up or delivery service); medical spas, facial spas, day spas, and non-medical massage therapy services; museums; nail and tanning salons; non-tribal card rooms; skating rinks; senior activity centers; ski resorts; social and private clubs; tattoo/piercing parlors; tennis clubs; theaters; yoga studios; and youth clubs.

(Order, section 2). Other retail establishments may stay open, provided that they establish, implement, and enforce a social distancing policy (section 6); businesses that remain open without enforcing social distancing can be closed for noncompliance (section 7). Grocery stores and health care, medical, and pharmacy services are not subject to closure, but are “encouraged to comply with social distancing guidelines” (section 8). 

The Order also directs all businesses, effective March 25, to “facilitate telework and work-at-home by employees, to the maximum extent possible. Work in offices is prohibited whenever telework and work-at-home options are available” (section 9). Businesses that are not able to offer telework or work-from-home options must “designate an employee or officer to establish, implement and enforce a social distancing policy” (section 10). Such policies must address how the business will maintain social distancing protocols for business-critical visitors (section 10).

Commercial Real Estate

We expect to see these restrictions remain in place for a month or more, although no end date or reconsideration date is set forth in the Order. For those in the commercial real estate (CRE) industry, mass closures of this duration are likely to strain even the healthiest portfolios and require restructuring of rent payment under many retail leases; office tenants in heavily affected industries may also have difficulty making rent, particularly if the closure period is lengthy. We expect to see transaction volume slow during government-mandated closures and at least through the immediate aftermath; the pace at which the CRE industry will recover depends on the extent to which assistance is or becomes available for struggling businesses, whether interest rates remain low, whether credit is available (regardless of interest rates) in light of overall economic uncertainty, and how quickly the stock market recovers once restrictions are lifted.

Construction

For those in the construction industry, telework and work-from-home options are likely unavailable for project operational teams, so projects will keep moving forward. Construction companies, owners, representatives, and design professionals (to the extent applicable) must establish, implement, and enforce social distancing policies as required by section 10. At the same time, businesses must also ensure that any employees who can telework or work from home do so.

The Order’s limitations are good for the construction industry, but we do not know how long this permission will be in place. Construction industry players should be careful to follow the mandate of the Order carefully. This means designating someone to establish, implement, and enforce social distancing policies who has sufficient authority and who has access to all resources needed for compliance. This also means having policies in place to deal with COVID-19 exposed or infected employees. As Governor Brown may revisit this Order, the industry wants to make sure there is no question about its compliance.

If you would like specific help, please do not hesitate to contact us.

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