Including hire to rising prices makes it laborious for small companies

NEW YORK (AP) – America’s small businesses have had to pay rent and at a very inopportune time.

Landlords were lenient in paying rent during the first two years of the pandemic. Now, many are asking for rent return, and some are also increasing the current rent. Meanwhile, most government aid programs to help small businesses get through the pandemic have ended while inflation has pushed up the costs of supplies, transportation and labor.

Martin Garcia, owner of the Gramercy Gift Gallery and gift shop in San Antonio, Texas, survived the early part of the pandemic by paying landlords whatever rent he could each month. Then in August 2021, after the federal eviction moratorium ended, his landlord demanded the full return of the rent he owed.

“I need $10,000 in 15 days,” says Garcia. He took out any loan he could find – often at high interest rates – and barely met the deadline.

A strong holiday season has helped him pay off his loans, but so far this year sales have fallen, and he’s used credit card funding to pay his rent for the month. his 6. Garcia thinks some of his clients are cutting back on non-essentials so they can pay higher prices for gas and other must-haves.

According to a survey from Alignable, a small business referral network, 33% of all US small businesses were unable to pay their rent in May in full and on time, up from 28% in April. And 52% said rents have increased in the past six months.

“Many small businesses are still frankly recovering from any final phase of COVID,” said Chuck Casto, head of corporate communications at Alignable. “Additionally, they are facing inflation that has been increasing for many years. It has made it difficult for small businesses to really try. “

Ris Lacoste owns a restaurant of the same name, Ris, in Washington, DC, and is staying afloat using a grant she received from the Restaurant Relief Fund to pay her rent. But this money must be spent by March 2023.

“What I have to do to survive after that, every penny that I can save has to be in reserve,” Lacoste said. To cut corners, she’s remodeling her desk to cut linen costs, doesn’t print color menus, and works with 22 employees instead of the 50 she used to have.

Before the pandemic, the 7,000-square-foot restaurant was usually full, but right now it’s not “operating at full capacity,” Ris said. At the same time, inflation is compounding the cost of doing business.

Lacoste said: “Payroll increased, labor increased, cost of goods increased, utilities increased. “I’m wearing 20 hats instead of 10 and working six days a week, 12 hours a day.”

But the rent is not something she can control, and that adds to the stress.

“You’re working for a landlord, how long do you want to do it, how long will you last?” she speaks. “It’s not sustainable.”

Data from commercial real estate finance and consulting firm Marcus & Millichap shows rents rose 4.6% in the first quarter of 2022 from the previous quarter as vacancy rates fell to 6.5%, Lowest since before 2015. But Daniel Taub, Marcus & Millichap’s Country Manager for Retail Sales, said inflation will make it harder for landlords to impose rent increases as consumers start to feel it. tightened.

“Consumers can only spend so much when the dollar is not far away, and retailers can only pay so much to carry space and have enough inventory to pay employees,” he said. tablets,” he said. “It’s a tough retail market and something will have to give up.”

Charleen Ferguson owns the building that houses the tech business she owns with her husband, Just Call the IT Guy, in Wylie, Texas. She also has 13 tenants, so she sees the dilemma from both the small business and the landlord’s perspective.

During the pandemic, Ferguson agreed with her tenants, from a massage therapist to a church, to suspend tenancy. When things started to look good again, she worked with the tenants to pay the rent back. All caught up within three months – with the exception of the church, to whom she had forgiven debts.

But she has had to raise rent by about 5% since May to keep up with the maintenance costs of her own building. Prices for utilities and cleaning supplies as well as property taxes have gone up. So far, she hasn’t lost any tenants.

“I made just enough to cover the increase, I didn’t do any more,” she said. “We’re not making a lot of money, but we’re keeping people in business.”

For some small businesses, higher rents are not an option. Solution: Remote control.

Alec Pow, CEO at ThePricer.org, a credit management consulting firm with eight employees in New York, said his landlord plans to increase rent by 30% when they renew their contract. . Pow expected a smaller gain. The landlord indicates they have a potential tenant who will receive the lease for the full asking price.

So Pow decided to lose his office and let his New York employees work remotely for two months while they looked for a cheaper space. The business also has an office in San Francisco and two in Europe.

“We are in the process of increasing staff salaries to combat the rise in inflation,” he said. “Our annual budget doesn’t have room for both of these expenses, so we had to choose one.”

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