One of the heartening things about crises is the way so many people pull together. Most people are still optimistic that the full lockdowns will be short-lived and that the economy will be able to rebound fairly quickly. As past recessions and depressions have shown, money changing hands through commerce is a critical element to recovery. Restaurants and other retailers and service providers are being creative about continuing to generate cash flow. My colleagues in banking, construction and numerous other industries are working harder than ever. Many people and businesses are willing to continue to spend.
Need to keep the money flowing!
One of the early concerns that I encountered among my clients and conversations with others in the industry was that tenants would simply stop paying rent, causing many landlords to default on mortgages, an on up the system.
Pegasus Investment’s Landlord Survey yields encouraging results
Pegasus Investments just published the results of a Landlord Survey on the state of the markets. The 651 landlords who took the survey provided a broad mix, with ~50% having 25 tenants or less in their portfolio, and 25% having more than 100 tenants. While the company makes it clear that the information is mostly anecdotal and unfiltered, it offers some bright spots:
- Rent collections through April 10th were a lot higher than many had feared (64%)
- Mom & Pop tenants were met by landlords with far more relief than national tenants were, although a surprising number of landlords did provide national tenants with relief
- Although only 20% of landlords reported sending out notices of default, that needs to be taken in the context that only 35% of rents weren’t current.
I think the raw data (CLICK HERE FOR THE CV19 LANDLORD SURVEY RESULTS) will be interesting to just about any landlord. I see cooperation rather than defensive actions being the majority response. It’s a good feeling.
Wall Street Journal, survey of renters . . .
I ran across another survey of April rent results in a seminar by Ted C. Jones, Chief Economist for Stewart Title that seemed to support the above data. A survey reported in the Wall Street Journal of 1,000+ small business owners with 50 or fewer employees showed:
30% made no rent payment
20% made partial rent payment
That is, 70% of those surveyed paid at least some of their April rent.
In addition, 25% said that their landlord or bank had offered a reduction or referral.
May Rent Collections will be telling
May rent collections may tell a very different story. Rent payments typically come from the previous month’s revenues, and April has been challenging for a number of businesses. How and when businesses will begin reopening, and the depth of business cash reserves that owners are willing to spend on rent will have a lot to do with how these numbers look in future months.
Most economics and industry experts in commercial real estate, business brokerage and other fields with their fingers on the economic pulse believe that recovery will be V-shaped, rather than U shaped, with the economy rebounding by Q4. I say hope for the best, plan for the worst.
- Monitor your business – know and record the impacts of the shutdown.
- Keep track of cash flow – it can be a challenge whether your business is being hurt or helped by the shutdown
- Stay in touch with clients and customers
- Get creative
- Take the opportunity to plan for recovery now so you will be ready when it happens