Rent stress weighing on businesses
Restaurants and other small operators have so far found landlords reluctant to offer relief
Restaurateur Priyanka Lewis is rushing to adjust the business model of her 75-seat Brickworks Gastro Pub in Whistler to survive the COVID-19 pandemic restrictions.
They’re working on takeout options and pondering the possibility of counter service later on. But they’re not counting on being able to get back to the high-end table service and capacity that used to pay the rent.
“If you run year-round 70-per-cent occupancy, you’re doing a good job,” said Lewis. “Even if we’re 50-percent (seating) and run 100-per-cent occupancy, which is unlikely, how will my model survive?”
To Lewis, the answer should involve the co-operation of landlords, and support from government as well.
“I feel that if our revenue is affected ... I feel the burden should be shared between government, landlord and tenant, whatever it might be,” Lewis said.
Businesses across the province need to readjust their expectations as the economy tips into recession with uncertain prospects for what kind of recovery will follow, said Jock Finlayson, chief policy officer for the Business Council of B.C.
In the short term, the federal government’s emergency commercial rent assistance program, which promises tenants of participating landlords a 75-per-cent break on rents for April, May and June, is intended to help the transition to the so-called “new normal.”
However, Lewis remains frustrated by rules for that program that still seem unclear, a month after it was announced.
And, in the longer term, Finlayson said he thinks “we’re going to have a lot of shell-shocked consumers and very cautious entrepreneurs in our economy.”
People will want to save more and be reluctant to spend, business owners might be reluctant to hire as a result and everyone from landlords to suppliers and banks need to adjust expectations and be prepared for “painful adjustments.”
“(Landlords) are going to have to be ready for somewhat of a different world going forward where ... the ability of retailers to pay top dollar as they’ve been doing for a prime space may diminish over time,” Finlayson said.
A survey by commercial realtor Colliers Canada found that one in five respondents had asked for rent relief in April, the company reported, with close to half of those indicating they couldn’t afford their rent payments. And small-business tenants were almost three times more likely to seek relief, the Colliers survey found.
However, business groups are hearing about landlords reluctant to take part in the rent assistance program, according to Michael Smith, spokesman for the grassroots group Save Canadian Small Business.
The pandemic crisis has accelerated adoption of ecommerce and delivery among retailers, Smith said, “but the reality is that the revenue is not going to necessarily make up for what would be ... street traffic.
“(With) cash flow being way down and unlikely to recover to previous levels means that rental rates absolutely will need to adjust,” Smith said.
Smith’s group is pushing the provinces to include a moratorium on commercial evictions to encourage more landlords to take part in the rent relief program.
Craft brewer Ben Coli at Dageraad Brewing is fortunate to be in a Burnaby industrial location with reasonable-for-him rents, but he worries about a lot of his restaurant clients.
“Part of the problem with all this stuff is that rent is so sticky,” Coli said. “Real estate is such a long-term asset,” with long-term leases.
With compromises on rents, some of the businesses might have a chance to survive, Coli said.
Many businesses are still in a “waiting game,” between the assistance programs offered by government and slowly gaining an understanding of what their “new normal” for business is going to be, said commercial realtor Mike Hodge of the firm Avison Young.
“Tenants need to be forthright with landlords and help educate landlords on what their business models look like, pre- and post (COVID19),” Hodge said. “Because if the landlord doesn’t understand that, it’s going to be hard for them to rationalize some sort of adjustment.
“(But) it’s going to be a little while longer before we actually see what that looks like.”