Add rent to the rising costs bedeviling small businesses – Honolulu, Hawaii

Honolulu, Hawaii 2022-07-04 17:00:00 –

New York >> Rent has come for small businesses in the United States and at a very unsuitable time.

The landlord was tolerant of paying rent for the first two years of the pandemic. Many people are now looking for back rents, and some are raising their current rents. Meanwhile, most government aid programs that helped SMEs overcome the pandemic ended while inflation was pushing up supply, transportation, and labor costs sharply.

Martin Garcia, owner of the Gramercy Gift Gallery, a gift and decoration store in San Antonio, Texas, survived the first part of the pandemic by paying the landlord a monthly rent. And in August 2021, after the federal moratorium on evictions of peasants ended, his landlord demanded the full amount of his backrent.

“We needed $ 10,000 in 15 days,” Garcia said. He took every loan he could find (often at high interest rates) and barely met the deadline.

The strong holiday season helped pay off his loan, but sales have fallen so far this year and he used credit card loans to pay his rent in June. Garcia believes that some of his customers are cutting down on non-essential things because they can afford to pay high prices for gasoline and other necessities.

According to a survey by Alignable, a small business referral network, 33% of all US small businesses failed to pay their May rent in full and on time from 28% in April. 52% also say that rents have risen over the last six months.

“Many small businesses are frankly recovering whatever the final stage of COVID is,” said Chuck Cast, Head of Corporate Communications at Alignable. “In addition, they are working on increasing inflation over the years, making it difficult for SMEs to actually do it.”

Ris Lacoste owns the restaurant Ris in Washington, DC, which is floating with the help of the Restaurant Relief Fund to pay the rent. However, the money must be spent by March 2023.

“What I have to do to stay alive after that is that every penny I can save must be a reserve,” Lacoste said. To reduce corners, she refinished the table to reduce linen costs, did not print color copies of the menu, and worked with 22 staff instead of the former 50.

Before the pandemic, the 7,000-square-foot restaurant was full, but not “returned to full.” At the same time, inflation is exacerbating the cost of doing business.

“The salary is rising, the labor force is rising, the cost of goods is rising, the utility is rising,” Lacoste said. “I wear 20 hats instead of 10, and I work 6 days a week, 12 hours a day.”

But rent is out of her control and it adds to the stress.

“You work for the landlord, how long do you want to do it, how long will you survive?” She said. “It’s not sustainable.”

According to data from commercial real estate finance and advisory firm Marcus & Millichap, rents in the first quarter of 2022 were 4.6 year-on-year as vacancy rates fell to a low of 6.5% from pre-2015. % Increased. Marcus & Millichap’s National Director of Retail Sales said inflation would make it difficult for landlords to impose rent increases as consumers began to feel pressured.

“Consumers can spend a lot only when the dollar isn’t too far away, retailers can pay a lot to carry space, and they have enough inventory to pay their employees,” he said. Said. “It’s a tough retail market and something will have to give.”

Charlene Ferguson owns a building in Wylie, Texas that houses a technology business with her husband, Just Call the IT Guy. She also has 13 tenants, so she sees the dilemma from both a small business and landlord perspective.

During the pandemic, Ferguson agreed to rent a moratorium to her occupants, from massage therapists to churches. When things started to resume, she worked with the tenant on a backrent. They all caught up within three months, except for the church where she allowed her debt.

However, she had to raise her rent by about 5% as of May to keep up with her own costs of maintaining the building. Utilities, cleaning supplies and property taxes are rising. So far, she hasn’t lost her tenant.

“I did just enough to cover the increase, I didn’t do any more,” she said. “We don’t make much money, but we keep people in business.”

Higher rents are not an option for some small businesses. Solution: Move to remote.

Alec Pow, CEO of ThePricer.org, which has eight employees in New York, said he plans to raise rent by 30% when the landlord renews his contract. POWs expected a slight increase. The landlord said there are tenants who will receive the lease in full as requested.

So Pow lost his office and decided to work remotely for two months while New York staff were looking for a cheaper space. We also have one office in San Francisco and two in Europe.

“We were in the process of raising employee wages to counter rising inflation,” he said. “Our annual budget couldn’t afford both of these costs, so we had to choose between them.”

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