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About 40% of major retailers didn't pay their rent in May due to the pandemic

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Posted at 5:29 PM, Jun 15, 2020
and last updated 2020-06-15 18:29:12-04

Businesses may be reopening, but they're still struggling to pay their rent.

About 40% of major retailers didn't pay their rent in May, according to numbers from data firm Datex Property Solutions.

Some companies are warning they won't be able to pay rent for months. Starbucks for example is asking for landlords to adjust lease terms and rent for at least 12 months.

It's an even worse situation for some small businesses.

“I would think landlords ordinarily are not that sympathetic, right, because they can get somebody else to pay the bill,” said Jack Strauss, an economics expert and professor at the University of Denver. “In this case, a landlord is foolish to ignore the struggling small business.”

Strauss says it will be difficult for landlords to find a new tenant quickly, so they have an incentive to delay or partially reduce rent.

Businesses in malls are getting hit especially hard. The country's latest mall owner recently sued Gap over three months of unpaid rent.

“Being sued kind of makes sense by the landlord to take a heavy hand, but at the same time, it doesn't make sense because they're going to have a lot of, they're potentially going to have a lot of empty spaces,” said Strauss.

Punchbowl Social, a national restaurant and entertainment spot just closed one location in the Denver area and one in the Chicago area, acknowledging that landlords are trying to ensure the success of their business.

But the CEO says, "landlords cannot expect to maintain status quo economic terms that were negotiated in pre-pandemic times."

Strauss agrees with that. He thinks landlords should provide one-year temporary rent reductions to businesses, just like many workers are taking pay reductions right now.

He says after a year, the landlords and businesses can renegotiate their rent.