A recent survey has found that many businesses are still struggling to pay their rents despite help from the government, and the situation is only expected to worsen as the COVID-pandemic drags on.
Roughly half of businesses representing key sectors of the economy did not pay rent in full in the latter half of last year, the survey found. More than half expect to miss at least one full rent payment between now and June.
“Unfortunately, the roller coaster ride for thousands of Hawaii businesses will continue for the foreseeable future until truly meaningful help from the government can be provided,” said Ryan Tanaka, founder of the survey, in a news release. “I’ve personally spoken to more than 100 business owners since the start of this survey and it is clear the situation is dire. Many don’t know how much longer their businesses will be able to survive.”
The survey, developed in partnership with the state Department of Business, Economic Development and Tourism, was conducted in December and is the third in a series. Previous ones were released in July and October.
The third Hawaii Commercial Rent Survey includes 1,126 businesses representing more than 30,000 workers statewide.
Among survey findings:
>> One in 10 Hawaii businesses permanently closed over the course of the pandemic, and 67% were impacted significantly by government restrictions.
>> Half did not pay rent in full from April to December last year, and more than half expect to miss at least one full rent payment between now and June.
>> Two in three businesses were significantly impacted or closed by government restrictions in 2020. Nearly the same number do not expect to survive this year without government-funded commercial rent relief.
>> Only 5% of businesses have restructured their lease, and only 14% received rent reduction.
>> More than 80% saw revenue decline in 2020, and more than 80% expect their annual revenue to decline in 2021.
The survey also found that many small businesses have had to make difficult decisions to survive, including layoffs. Among those hardest hit are the restaurant, retail, entertainment and wholesale trade sectors as well as their supply chains.
Tanaka said what was alarming in this survey is that 5 in 10 businesses missed rent compared to 4 in 10 from the previous one.
“You can see the situation’s getting progressively worst,” he said.
But this came as no surprise, he said, since businesses have been suffering from lack of foot traffic and operating at half capacity.
Federal relief funds, including small business grants and past or future Paycheck Protection Program loans, he added, are not enough to compensate for nine months of accumulating back rent — the largest fixed cost for businesses.
Tanaka, also president of financial consulting firm Island Business Management LLC, is an advocate of providing rent relief to businesses through a commercial landlord-tenant grant program. The concept was part of a resolution to support economic recovery approved by the Honolulu City Council last year.
A coalition of trade associations and businesses is seeking $180 million for the program, which he says would be modeled after a residential rent relief program in which the tenant applies for the grant, and the money goes to the landlord for its intended purpose.
The end goal, he said, is to help keep jobs in the economy.
”We know eventually the market will recover,” he said. “We just need to help prop up this part of our economy that has been hardest hit by government-imposed restrictions and then we can all emerge together out of the pandemic.”