The rent has become due to small American businesses and at a very unfavorable time.
Landlords were lenient about rent payments during the first two years of the pandemic. Now, many are asking for rent back, and some are raising the current rent as well. Meanwhile, most government aid programs that have helped small businesses get through the pandemic have ended and inflation has pushed up the cost of supplies, shipping and labor.
Martin Garcia, owner of the gift shop and décor of the Gramercy Gift Gallery in San Antonio, Texas, survived the first part of the pandemic in part by whatever rent he could pay each month to his landlord. Then in August 2021, when the federal moratorium on evictions ended, his landlord demanded the full amount of the rent arrears owed to him.
“I needed $ 10,000 in 15 days,” Garcia said. He took out whatever loans he could get – often at high interest rates – and barely reached the deadline.
A strong holiday season has helped him repay his loans, but so far this year sales have fallen, and he used credit card financing to pay his June rent. Garcia thinks some of its customers are cutting back on unnecessary items in order to be able to pay the higher prices for gasoline and other essentials.
Thirty-three percent of U.S. small businesses could not pay their May rent in full and on time, up from 28% in April, according to a survey by Ailginable, a small business referral network. And 52% said rents have increased in the last six months.
“Many small businesses are still recovering honestly from the last phase of COVID,” said Chuck Casto, head of corporate communications at Ailginable. “Also, they’re dealing with the value of a year of rising inflation on top of that. It’s hard for small businesses to really try.”
“Not sustainable”
Ris Lacoste, Ris, has a designated restaurant in Washington, D.C., and is staying afloat using the assistance she received from the Restaurant Relief Fund to pay her rent. Read also : Pioneering NASA aerospace industry official: ‘Bro culture’ is bad for business. But the money must be spent by March 2023.
“What I have to do to stay alive later, every penny that I can save must go into reserve,” Lacoste said. To cut corners she is refilling tables to reduce linen costs, without printing color copies of menus, and working with 22 staff instead of the 50 she once had.
Prior to the pandemic, the 7,000 – square – foot restaurant was often full, but it’s not back to full occupancy at all, “Ris said. At the same time, inflation is increasing the cost of doing business.
“Payroll is up, labor is up, the cost of goods is up, utilities are going up,” Lacoste said. “I’m wearing 20 hats instead of 10, and working six days a week, 12 hours a day.”
But rent is not something she can control, and that adds to the stress.
“You are working for the landlord, how long will you want to do that, how long will you live?” she said. “It’s not sustainable.”
Inflation dilemma
Data from real estate consulting and financing firm Marcus & amp; Millichap points out that rents rose 4.6% in the first quarter of 2022 compared to a year ago as the vacancy rate fell to 6. On the same subject : Google Launches New Funding and Support Programs for International Small Business Week.5%, the lowest rate since 2015. But Daniel Taub, national director of retail sales at Marcus & amp; Millichap, that it will be more difficult for landlords to cut rent increases as the consumer feels they are under inflationary pressure.
“Consumers can only spend so much when the dollar doesn’t go that far, and retailers can only pay so much to transport space and have enough inventory to pay employees,” he said. he. “It’s a tough retail market and will have to bring something.”
Charleen Ferguson owns the building that houses the technology business she owns with her husband, Just Call the I.T. Guy, in Wylie, Texas. She also has 13 tenants, so she sees the dilemma from both the small business and the landlord.
During the pandemic, Ferguson agreed with his tenants, which ranged from a massage therapist to a church, to hire a moratorium. When things started to reopen, she worked with tenants on the back rent. They all caught up within three months – except the church, which wants its debts.
But she had to raise rents by about 5% from May to keep up with her own costs of maintaining the building. Prices have increased for utilities and cleaning supplies, as well as property taxes. To date, it has lost no tenants.
“I did enough to cover the increases, I did not do more,” she said. “We’re not making much money, but we’re keeping people in business.”
Taking business online
For some small businesses, higher rents are not an option. On the same subject : Maximize business value with data-driven strategies. The solution: Go remote.
Alec Pow, CEO at ThePricer.org, a credit management consultancy with 8 New York employees, said his landlord planned to raise rents by 30% when they renewed the contract. Pow was expecting a smaller increase. The landlord stated that they had a prospective tenant who would take the lease at the full price requested.
So Pow decided to lose the office and let his staff in New York work remotely for two months in search of cheaper space. The business also has one office in San Francisco and two offices in Europe.
“We were in the process of increasing the pay of our employees to counter the rise in inflation,” he said. “Our annual budget did not have space for these two costs, so we had to pick one.”
