Retail Real Estate Could Be Approaching Its Own Eviction Crisis
As the federal government has allowed several aid programs enacted to stabilize the economy to lapse, small retail businesses around the country are staring down the prospect of losing outdoor options as summer turns to fall and then winter. Thousands are expected to close before the end of the year if nothing changes, putting millions out of work, The New York Times reports.
The money disbursed by the Paycheck Protection Program has virtually run out and eviction moratoriums across the country have either ended in recent weeks or will end in the weeks to come. Many retail landlords have already started eviction proceedings against their tenants at the earliest opportunity, The Wall Street Journal reports.
Many tenants have been able to negotiate agreements for deferred payments if businesses are ordered to close, and national companies have the resources and sway to pressure landlords into friendly deals. Small businesses, especially those owned by people of color, have fewer financial connections or influence and have already been closing at a much higher rate as a result, the Times reports.
Even though small businesses are more likely to be evicted, brand names are not immune — Whitman Family Development has launched eviction proceedings against Saks Fifth Avenue, a tenant at the Bal Harbour Shops retail development it owns in South Florida, alleging nearly $2M in unpaid rent, the WSJ reports.
Around 77% of retail tenants are current on rent payments, up significantly from the April low point of 54%, according to a Datex Property Solutions report provided to the WSJ.
In previous years, missed rent payments were often not enough to spur eviction, as landlords preferred to keep a space occupied through mediation or compromise, but more disputes have been arising in similar situations this summer. One retail landlord told the WSJ it has taken legal action against more struggling tenants, with 10 already departing since the coronavirus pandemic broke out.