Third Hawaiʻi Commercial Rent Survey Reinforces Urgent Need for Relief
The results of the Third Hawaiʻi Commercial Rent Survey with National Overlay show the commercial rent situation continues to worsen for businesses in Hawaiʻi and across the country due to the affects of the COVID-19 pandemic, according to a joint news release.
The latest Hawaiʻi-based survey expanded the research scope at the end of 2020 to include data from businesses across the United State. It is a partnership between the State of Hawaiʻi Department of Business, Economic Development and Tourism (DBEDT), the Seattle-based Center for Housing Economics, the National Association of Industrial and Office Properties and others in Hawaiʻi’s business community.
The top-level findings confirmed:
- Consistent need for commercial rent assistance in Hawaiʻi and across the United States.
- Many businesses permanently closed their doors and laid-off employees in 2020 due to the burden of commercial rent compounded with the costs of doing business in the new normal.
- Many businesses do not expect to survive through the end of 2021 without government-funded rent relief.
- A total of 1,205 business owners across 19 primary industries were polled with the majority of the respondents (93 percent) from Hawaiʻi.
- 60 percent of businesses have closed due to the pandemic, while only 49 percent have partially or completely reopened.
- Two in three businesses were significantly impacted or closed due to government restrictions in 2020.
- Three in five businesses do not expect to survive through the end of 2021.
- 27 percent of businesses expect their annual revenue to decline by more than 50 percent in 2021.
- 56 percent of businesses are being impacted significantly by COVID-19.
The vast majority of businesses surveyed said they received federal assistance with 83 percent benefiting from support of the Paycheck Protection Program (PPP) and/or the Small Business Administration relief programs. Nonetheless, 49 percent expect to miss at least one full rent payment between January and June 2021 and only 5 percent have been able to restructure their leases.
Only 15 percent of businesses surveyed received a reduction in rent, while 42 percent of businesses received $3,000 or less per month in rent assistance.
In sum, 63 percent of businesses do not believe they will survive in 2021 without government-funded commercial rent relief. This is based on data showing 49 percent of businesses surveyed did not pay rent in full from April to December 2020.
Businesses used government stimulus funds to finance a portion of their expenses in 2020 but the amount and timing of financial support was too little, too late for many businesses that had to close their doors permanently. Hardest hit businesses have not been able to pay rent, continue to add to their rent burden, and expect to miss further rent payments in 2021.
Businesses face increased headwinds due to a projected gradual economic recovery, safety regulations affecting business capacity and service, and businesses already operating with thin margins continue to struggle to break even. This is in addition to deferred payments of accumulating back rent, the new release said.
“Unfortunately, the rollercoaster ride for thousands of businesses is reflected across the nation for the foreseeable future until truly meaningful help from the government can be provided,” said Ryan Tanaka, Hawaiʻi Commercial Rent Survey organizer and president of Island Business Management. “I’ve personally spoken to more than one hundred business owners since the start of this survey and it is clear the situation is dire. Many do not know how much longer their businesses will be able to survive.”
Roger Valdez, founder of Seattle For Growth’s Center for Housing Economics, said collaborating with Hawaiʻi’s business leaders on this national survey was intended to combat misinformation about housing with better data, better ideas, and with a hope of changing the narrative.
“The big picture is that commercial and residential real estate are tightly woven together,” Valdez said. “When businesses close, individuals lose their jobs and their income, which ultimately translates to the inability to pay their rent. Everyone is impacted, which is why commercial rent relief is so critical to sustain our economy right now.”