When we were all under strict rules to stay home and brick and mortar retailers were forced to close up shop for extended periods of time, fears and frustrations soared. With close to zero revenue coming in the door for many retailers during the COVID-19 stay-at-home orders, they and their landlords have been working together to address outstanding rent obligations, according to a new survey from the National Retail Federation and PJ Solomon.
David French, Senior Vice President of Government Relations for the National Retail Federation, says, “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.” He adds, “The influx of stimulus-driven consumer spending and negotiations with landlords has helped keep retailers afloat.” However, he warns, “As retailers look ahead to cover rent and other expenses in the coming months, more federal government relief is needed to ensure the industry can continue to rebound and fuel the economic recovery.”
A recent survey of C-level executives at large, U.S. retail chains conducted by the National Retail Federation and PJ Solomon found that at peak closure 73-percent had closed at least three-quarters of their physical store locations including those in enclosed malls and outlet centers.
While less than a third of respondents paid at least 75-percent of June’s rent, by July that figure had nearly doubled to 65-percent. Further, 73-percent of retailers who missed payments said they would pay back at least half of all rent owed and more than 50-percent said they were able to get some form of rent relief from landlords, with back-rent deferrals to late 2020 or 2021 being the most common concession. The most common trade-offs for that relief came in the form of reduced co-tenancy rights and delayed kick-out clauses for the retailers. Less than 10-percent have yet to reach out to their landlords about potential rent relief options.
Jeff Derman, Managing Director at PJ Soloman, a leading financial advisory firm, says, “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.” He notes, “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.”
When asked about potential rent forgiveness programs (RFP), 67-percent of respondents agreed “retailers that are economically impacted by the pandemic should receive assistance to pay their rents for a three-month covered period” (June to August 2020), while 33-percent said RFP should “protect retailers from downgrades in credit ratings and scores due to any missed rent payments during the COVID-19 crisis.” As a condition to rent forgiveness, half of the respondents agreed that “tenants receiving assistance must demonstrate economic harm from COVID-19 (for example, shuttered business, layoffs and furloughs) and certify it will use rent forgiveness proceeds only for purposes of paying rent for obligations incurred during the ‘covered period.’”
The survey of 48 C-level executives of retailers with 2019 sales of $100 million-plus and at least 10 store locations was conducted from July 15th – 28th. Click here to view a one pager on the survey results: PJS-NRF-COVID19-Survey-Results-Sept-2020
The National Retail Federation, the world’s largest retail trade association, advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs — 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.