Hawaii retailers seek rent relief as coronavirus pandemic wears on

Many of Hawaii’s retail shops and businesses are still clinging to hope of surviving the COVID-19 pandemic, which has affected them for nearly a year now.

Some threw in the towel, seeing no other option but to close, while some are shifting online and yet others are hoping for another lifeline from government, mostly in the form of rent relief, to stay afloat as the pandemic drags on.

ABC Stores, the popular chain of convenience stores in Hawaii’s tourist meccas, is feeling the struggle, despite the return of visitors and launch of the state’s Safe Travels pre-testing program in mid-October.

“They’re not back in droves,” said President and CEO Paul Kosasa, describing sales in Waikiki as slow. “I think everybody is just trying to be more careful. I think the focus is not so much on traveling, but waiting their turn to get vaccinated.”

Sales are down more than 50% at the stores on nearly every corner of Waikiki and across Hawaii. Kosasa said there has been a small uptick in online sales for items like face masks and gifts, but it has been fractional.

Roughly a little more than half of the 65 ABC stores in Hawaii remain open, while the others remain temporarily closed at this time.

Of the more than 1,000 employees Kosasa had previous to COVID-19, he said an estimated 600 to 700 employees remain on furlough, and though the intention is to bring them back eventually, some have quit, relocated or moved on to other jobs.

Kosasa said he is keeping some ABC Stores open at a loss to serve residents and the few visitors who are here. He said any kind of relief would be of help, particularly rent and payroll relief.

Many Hawaii businesses are still struggling to pay their rents despite help from the government, with the situation expected to only worsen as the pandemic drags on, according to a recent survey launched by consultant Ryan Tanaka.

More than half expect to miss at least one full rent payment between now and June. Among those hardest-hit are the restaurant, retail, entertainment and wholesale trade sectors as well as their supply chains.

Tanaka, president of financial consulting firm Island Business Management, started the surveys to keep tabs on how dire the situation is. Tanaka is also an advocate of providing commercial rent relief to businesses through a grant program. The concept was part of a resolution to support economic recovery approved last year by the Honolulu City Council.

Now he is pushing for House Bill 1324, a commercial rent relief grant program that would be administered by the state Department of Business, Economic Development and Tourism using federal funds.

The bill — which proposes grants of no more than 3% of taxable revenue or three months of full rent for commercial landowners — is making its way through the Legislature, and most recently scheduled for a hearing by the finance committee.

Pandemic reality

For some, like Lisa Kim, former-co owner of Real Gastropub, a restaurant, bar and brewery in Kakaako, it’s too late.

Kim said she saw the writing on the wall. She and her partner, Troy Terorotua, had made a significant investment into the more than 3,000-square-foot space on the ground floor of Keauhou Lane, and had been open just a little over a year when the pandemic hit.

They had been off to a good start, with large bookings, but with the closures, and restrictions in place, she knew it made no sense to keep going. Even if Real were to remain open, the business would have needed to make a good $23,000 a month in takeout just to pay the rent, she said, which just wasn’t realistic.

“If we had more time, it would have worked out really well,” she said. “But we would have dug ourselves deeper.”

In addition, Kim recently sold Brew’d Craft Pub in Kaimuki, which she had owned since 2014, to new owners, who will keep the name and menu in place.

Even though Real Gastropub is history, Kim supports the commercial grant program as an entrepreneur because she sees the need for it for many small businesses that are struggling, and that are going to owe piles of back rent.

Online pivot

Tanna Dang, owner of fashion and gifts boutique Eden in Love, plans to pivot to online only and to vacate her retail space at South Shore Market in Kakaako when the lease ends in January.

Even with the rollout of COVID-19 vaccines, Dang said this is the direction the business is heading because of the pandemic, following four months of closure due to lockdowns.

The Paycheck Protection Program last year helped keep the business afloat. Another 1,000-square-foot store in Waikiki closed right at the end of 2019, before the pandemic hit. If not, Dang said, it might have put the business over the edge without any rent relief.

She does not expect things to return to the way they were before.

The decision was made on Christmas Eve, following a successful online Black Friday sales campaign. Eden in Love made the announcement to its customers via social media — and Dang says there is no looking back.

“This is an opportunity to do something new and re-create it in a different way,” she said.

She will keep her warehouse space but vacate her 3,000-square-foot retail space at South Shore Market, and when the lease is up for the Las Vegas store, vacate that 2,000-square-foot space as well in a year and a half.

Whereas online sales used to make up only 10% of sales, it now makes up about 90%, she said.

“Honestly, I never imagined not having a store,” she said. “I love the visuals of it. But I never thought we could do the same thing online, and do better and not have overhead and streamline our team.”

Paying the rent

Tina Yamaki, president of Retail Merchants of Hawaii, said the holidays were a make-it-or-break-it period for many retailers.

Some did better than expected, but sadly, many did not make it, she said, which is apparent from papered­-over storefronts at major malls, shopping centers and in neighborhoods.

Even with visitors having returned to the islands, the trickle is slow, and not enough to make a big impact. In some neighborhoods like downtown Honolulu that do not rely on tourism, there is no longer enough lunchtime traffic to support restaurants and other retail.

If Oahu were to move to Tier 3, allowing retail stores to operate at full rather than 50% capacity, would there still be the same volume of customers? Yamaki said more people are now watching their budgets.

Middle and larger-size businesses have not had much help, but employ many local residents, she said.

Yamaki said she has heard stories from some retailers of dipping into education funds, pulling kids out of private schools, and at least one who sold their home and moved in with family in order to keep their businesses afloat.

“We hear all of these stories, and it’s just really heartbreaking,” she said. “A lot of this is not because the businesses were mismanaged, but because government shut us down.”

The Chamber of Commerce Hawaii, in a recent survey of more than 300 members, found that almost half have reduced their workforce, and welcome financial relief as well as a reprieve from any increased costs of doing business in Hawaii.

Many believe the road to recovery will take more than a year — 16 months on average.

Nearly 2 out of 3 local businesses are facing severe downturns in revenues, which in turn resulted in job cuts, the chamber said. In addition, nearly 51% of businesses surveyed said they would have to make more cuts or their business would not survive with current restrictions in place.

The Retail Merchants of Hawaii, along with the chamber, testified in support of the bill, saying additional support is needed, particularly for the state’s small businesses.

Yamaki said every business’s relationship with its landlord is different, and while some may be lucky enough to get reduced rent or even rent forgiveness, others have been given rent deferrals and yet others must pay full rent.

“Whether retail or restaurant, they need help with rent relief. That’s the No. 1 thing,” said Yamaki. “That’s the single largest expense.”