Half of Brooklyn’s small businesses haven’t been able to pay their rent in full since the start of the COVID pandemic in March, according to a new survey.
And with nearly half of all landlords offering some form of rent concession, the dominos are beginning to tumble on the city’s economy.
“Small businesses are on life support and struggling to survive,” said Randy Peers, president of the Brooklyn Chamber of Commerce, which carried out a survey of 264 Brooklyn-based restaurants, bars, retail, health and wellness, professional services, and other small businesses they believe is emblematic of the city’s situation as a whole.
“For most, stimulus funding through PPP has long been exhausted and many businesses that are uncertain about the future are now hedging their bets over what rent they can afford to pay,” added Peers.
With the situation already bordering on crisis as COVID infection rates threaten to surge, Peers warned, “Another wholesale shutdown in the future could bring total collapse.
“Small businesses urgently need another federal stimulus package and ‘recovery leases’ proposed at the state level, which relieve crushing rent bills and address past-due payments.”
Nearly half of the businesses surveyed (49 percent) said they received some form of rent concessions in November (up from 25 percent in September and August), with 21 percent receiving rent reductions, and 21 percent receiving rent deferrals where the amount owed was tacked on to the back end of the tenants’ lease.
The survey found that 40 percent of respondents pay more than one quarter of their monthly revenue in rent and 16 percent pay more than half. 48 percent said they owe back rent for previous months, a situation most fear will send them into bankruptcy if New York’s moratorium on evicting commercial tenants is lifted without any counterbalancing financial relief.
The Chamber cited “one small glimmer of hope for small businesses” is the growing number of landlords who are offering rent concessions. Nearly half of businesses (49 percent) received some form of rent concessions in November (up from 25 percent in September and August), with 21 percent receiving rent reductions, and 21 percent receiving rent deferrals where the amount owed was tacked on to the back end of the tenants’ lease.
However, James Whelan, president of the Real Estate Board of New York, warned that landlords too are teetering on the brink.
“Even as commercial property owners keep doing everything in their power to work closely with COVID-impacted tenants, it’s clear that this unprecedented crisis can only be addressed with robust federal support,” said Whelan/
“REBNY will continue to strongly advocate for expanded small business aid – including additional PPP funds and policy proposals like the Workplace Recovery Act – in any new federal stimulus package.”
Working with partners including the Real Estate Roundtable and International Council of Shopping Centers, REBNY has been advocating for aid such as the Workplace Recovery Act that would provide retroactive relief to cover 90 percent of all operating expenses including rent and payroll.
The plan would work much like the Terrorism Risk Insurance Act introduced after the 9/11 attacks by pairing the resources of the federal government with the expertise and claims processing functions of the insurance industry.
According to REBNY, such a plan could provide direct reimbursement to every business for operating losses, limited to 90 percent of past revenues, through a Federal Automated Security Trust (FAST) program.
Payments would cover payroll, operating expenses, rent, and debt service from March 1, 2020 through Dec 31, 2020. There would be no coverage for lost profits.
For many small businesses, help can’t come soon enough. One MWBE business owner of a Cobble Hill tutoring center that recently permanently closed said, “After six months of not being able to pay my commercial rent, zero concessions from my landlord and no assistance from government or philanthropic groups, I closed my storefront.”
A restaurant owner in Downtown Brooklyn added, “We have paid 50 percent of rent since June, with the balance being deferred to the end of the lease. It has helped to keep us open from a cash flow perspective, but we are digging a large hole and I don’t see how we will get out of it without some financial help.”