Less Than a Third of Retailers Paid 75% of Rent in June, With a Majority in Favor of Rental Assistance
Many retailers lost their predominant channels of revenue when brick-and-mortar stores were required to close earlier this year. A new survey by the National Retail Federation and financial advisory firm PJ Solomon reveals that, while there has been some recovery in terms of retail rent payments, there may still be a need for greater federal relief in the coming months.
NRF and PJ Solomon focused on larger retail companies, speaking with C-level executives at businesses that reported 2019 sales of at least $100 million, with at least 10 store locations. The survey found that 73% of those surveyed had closed at least three-quarters of their stores, including those found in malls and outlet centers, during the pandemic.
The impact was widespread: less than a third of the retailers paid 75% of their June rent, suggesting limited cash flow. Even for those who might have been able to pay that amount or the full sum of rent, the uncertainty about when stores could reopen and business could resume may have led retailers to withhold the full amount of rent, in order to maintain some liquidity.
However, this was a temporary issue, according to survey results. In July, the number of retailers paying 75% of their rent almost doubled to 65%, as stores began to reopen and consumers began to spend more through online channels.
“We started to see some encouraging signs for the retail industry with June’s positive sales growth and within the backdrop of a gradually reopening economy,” said David French, SVP of government relations at NRF. “The influx of stimulus-driven consumer spending and negotiations with landlords has helped keep retailers afloat.”
The survey found that negotiations with landlords helped a significant number of retailers. Of those who had missed rent payments, more than 50% were able to receive rent relief from their landlords, most commonly in the form of back-rent deferrals to late 2020 or 2021. And it appears that that trust is well-placed: 73% of those who missed payments claim that they will be able to repay at least half of the rent owed since March.
“If you’re a retailer with an extensive store footprint, effectively managing these fixed costs has been critical to preserving cash while brick-and-mortar sales remain under pressure, even as online sales surge for many,” said Jeff Derman, managing director at PJ Solomon.
While brick-and-mortar has continued to rebound in many states across the U.S., the possibility of a second wave of cases has some concerned about a possible repeat of store shutdowns. Should these stores be closed again, many retailers may have to open negotiations with their landlords again in order to stay afloat. However, this may place undue burden on real estate owners, who have also been hit by the pandemic.
The survey found that retailers themselves are in favor of rent forgiveness programs or rent assistance, with 67% agreeing to the statement that those “economically impacted by the pandemic should receive assistance to pay their rents for a three-month covered period.” Half of respondents agreed that there should be a condition of proven economic harm from COVID-19, as well as a commitment to only use the funds towards rent payments.
“Genuine rent relief through this unprecedented period, whether it is landlord- or government-driven in the future, will hopefully provide sufficient runway for many of these retailers to maintain liquidity long enough to continue serving their customers and paying their employees until the pandemic’s most severe effects have retreated,” said Derman.
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