Third Hawaiʻi Commercial Rent Survey Reveals Small Businesses Struggling to Survive Despite Aid

The results of the newly released Third Hawai‘i Commercial Rent Survey (HCRS) reveal key sectors of Hawai‘i’s economy continue to suffer financially as the COVID-19 pandemic drags on — and despite implementation of state and county aid programs in late 2020.

The third study, conducted in December, identifies sectors of the economy that have been hardest hit, including restaurants, retail, entertainment, wholesale trade and the supply chains.

As a result, small businesses who employ the majority of Hawai‘i’s workforce have had to make difficult operational decisions to survive, including employee layoffs impacting thousands of residents.

“Unfortunately, the rollercoaster ride for thousands of Hawai‘i businesses will continue for the foreseeable future until truly meaningful help from the government can be provided,” said Ryan Tanaka, HCRS organizer and president of Island Business Management. “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.”

Statewide, 1,126 businesses, representing more than 30,000 workers, participated in the survey that collected data throughout December 2020. The survey’s findings revealed:

• One in 10 Hawai‘i businesses permanently closed over the course of the pandemic, with 67 percent significantly impacted by government restrictions.
• From April through December 2020, 50 percent of businesses did not pay their rent in full.
• Three in 10 businesses expected to miss three full rent payments between October and December 2020, and more than half expected to miss at least one full rent payment between January and June 2021.
• Tourism accounts for at least one-quarter of the overall revenue of 37 percent of Hawai‘i businesses.
• 86 percent of businesses had annual revenue decrease in 2020, and 82 percent expect a decrease in 2021.
• Only 14 percent of businesses received rent reductions.
• Only 5 percent of businesses were able to restructure their leases.

“We understand that the state has never been in a pandemic and economic crisis like this before, and we’re doing our best to remain patient,” said Lisa Kim, owner of BREW’d Craftpub in Kaimuki. “However, the reality is we’re not sure how much longer we can wait for help from the government. We continue to abide by all their restrictions and are doing what we can to survive. But the truth is businesses need help and we need it soon.”

Kim and her business partner Troy Terorotua made the tough decision in June 2020 to close their other restaurant REAL Gastropub due to challenges brought on by the pandemic and government restrictions at the time.

While most businesses received federal assistance (including from the Paycheck Protection Program) and local assistance from their county’s grant programs for small businesses, the HCRS survey found that without additional government-funded commercial rent relief, 64 percent of business owners do not believe their business will be able to survive in 2021.

“Small businesses are telling us that without commercial rent relief, they expect to miss 3 to 6 months of full rent payments between January and June 2021,” Tanaka said. “Without direct government intervention, the accumulating back rent caused by government restrictions have put small businesses at a point of no return. If we let these businesses permanently close, our neighbors and friends could be without work for a very long time and government furloughs will likely become more severe.”

In June and September 2020, the State of Hawai‘i Department of Business, Economic Development and Tourism (DBEDT) developed the survey, collected the information and tabulated the data. The results of the first two surveys were shared with the Honolulu City Council, which unanimously approved Resolution 20-208 urging the administration of the City and County of Honolulu to establish a Commercial Landlord-Tenant Grant Program. Supporters of the resolution include hundreds of business owners and 13 trade associations representing more than 10,000 members.

In December, the coalition of Hawai‘i businesses, trade associations and financial institutions behind this survey submitted a proposal to Gov. David Ige and City and County of Honolulu Mayor Rick Blangiardi urging them to fund $180 million towards a statewide and county Commercial Landlord-Tenant Grant Program.

“The data could not be clearer,” Tanaka said. “Small businesses will need commercial rent relief to survive. As the backbone of our economy, small businesses provide jobs, increase tax revenue and strengthen government budgets.”

Despite businesses receiving a second round of PPP, many small businesses will be unable to address their accumulated back rent resulting from government restrictions. Survey results show that without further government help, businesses already hardest hit still face the possibility of permanent closure, which means unemployment will continue for tens of thousands of local households.

“It’s all about keeping small business owners healthy, because small business is the engine for our economic recovery and to maintain jobs,” Tanaka said.