Alignable: Only 8% Of SMBs Negotiated Reduced Rent During The Age Of COVID

DATA INSIGHTS | TREND TRACKER | New Month-Long Alignable Poll Finds Few Small Businesses Have Received Better Rent Deals

Editor's Note: This research is part of an in-depth series of polls of over 510,000 small business owners in the U.S. & Canada affected by the Coronavirus. To see more of our findings, go here.

Small business owners are struggling with many COVID-era issues, including: bringing revenue back, assuring scared customers that it's safe to return, dwindling cash reserves, hiring or re-hiring, forced reclosures amid new outbreaks, and paying the rent, to name just a few. 

A recent Alignable Pulse Poll focused on whether or not small business owners were able to pay their rent.

From August 15- September 16, 2020, a whopping 22,458 small business owners replied to six questions, revealing several trends -- some are captured in this chart.

78% Of Small Businesses Didn't Get Rent Reductions

The two most startling statistics here are that only 8% were successful in negotiating lower rent with their landlords and that 78% were not.

Despite unparalleled hardships faced by the majority of small business owners in North America, only a tiny fraction of small businesses got a break on their rent.

However, the ones who did benefit from lower rent bestowed glowing praise on their landlords. Many said the landlords gave them a break without them needing to ask. "Just pay what you can now," was one of the most positive responses offered by landlords.

And 4% said they either never thought to ask or didn't consider it a good idea.  Many said they sympathized with landlords knowing they have bills to pay, as well, and are often small business owners themselves. Then you had the folks who were too afraid to bring it up and just "suffered in silence," as one small business owner said.

The remaining 10% in the "Other" category included people who actually had the rent raised on them, instead of lowered, or they were in the middle of negotiations with landlords. And then some were evicted when they couldn't pay and closed their businesses.

Gyms Top The List Of SMBs Landing Lower Rent

Finally, small business owners in some industries had an easier time than others in negotiating lower rent, exceeding the national standard of just 8%:

• Sports/Fitness (Gyms & Trainers): 14% of them created better agreements.
  
• Education (Tutoring businesses): 12%
• Food/Beverage (Restaurants): 10%

While small business owners in these industries struggled more than most:

• Beauty (Salons/Barber Shops): Only 7% of the owners in this industry inked better deals. 
• Construction & Home Services: 4%
• Finance (Accounting Firms): 4%

Most SMBs Had Better Luck Delaying Rent

In general, however, small business owners benefited more from focusing on pushing off the rent payments, rather than lowering them.

While 78% of small businesses that couldn't cut a deal with their landlords remains consistent with this question, at least 22% could effectively work to delay their rent payments.

Whether or not landlords were able to grant rent reductions or delays, some of them actually helped small business owners to apply for the PPP funds and waited for those to come in before asking for the rent.

Some members even said their landlords said they wanted to keep them as tenants and were fine with them tagging the rent onto the end of the year or sometime when COVID was less of a factor and they could earn more money.

The majority of small businesses who were able to delay their rent -- 81% -- benefited from a window extending just a few weeks to a three months. In fact, the most likely offer was between one to three months, which occurred 71% of the time.

Resurgence Landlords Offered More

Some landlords gave tenants more leeway. Longer-term delays, in fact, were more popular in states experiencing resurgences, including California, Florida, Texas, Georgia and Arizona.

In the resurgence states, 17.4% of small businesses received a delay between 4 and 6 months from their landlords. That’s 24% higher than the national figure of 14%.

Nationwide, 5% of small businesses reported getting very generous extensions of one year or more.

But in the states with resurgences, that figure was 6.8% or 36% higher. In many of those cases, the tenant-landlord relationship had lasted more than a decade.

Restaurants Lead The Pack 

Looking at different industries, some exceeded the national standard of 22%, while others fell below, ultimately having a much harder time convincing landlords to give them extensions. Those who were most successful in coordinating delays came from these industries: 

• Food/Beverage (Restaurants): 26% of restaurant owners were able to convince landlords to delay their rent
• Sports/Fitness (Gyms & Trainers): 24%
• Beauty (Salons & Barber Shops): 23%
• Education: 23%
• Retail/Consumer Goods: 23%

The industries with small business owners who couldn't negotiate rent delays as well include:

• Construction/Home Services: 16%
  
• Marketing/Advertising: 16%
• Real Estate: 15%

Some Landlords Helped Tenants Apply For The PPP

We also heard from several landlords who said they did what they could to give tenants rent delays.  And many of them apparently even helped their tenants with their PPP applications, giving them a break until some of that money came in. 

But many landlords were also suffering from the COVID threat, with people refusing to pay rent and not negotiating with them. 

Net, net -- they needed to pay their mortgages, as the banks weren't giving them any special deals.

Many people taking the poll understood that stark reality, which should be good news for the landlords reading this story.

How Does This All Add Up? Paying Full Rent On Time

Another major finding from this poll was that, when the dust settled, one-quarter of all small businesses have not paid full rent on time since March, whether or not they inked a new deal with landlords, as this chart shows. 

While that 25% figure certainly has had a very negative effect on commercial real estate and on countless local economies, it also shows just how desperate this situation is for many small business owners, who otherwise would be happy to pay their full rent.

They've faced cash flow crises, resurgences, being shut down for several months -- and some are still closed or have reclosed. Approximately 3% have shut down forever.

However, the good news is that, despite countless challenges, 75% of small business owners reported paying their rent in full and on time over the past six months. 

Big Swings By Industry

There’s a great deal of variation in terms of which small business categories could handle the rent, and which ones couldn't. Industries that struggled with the rent the most include:

• Sports/Fitness (Gyms, Trainers): Only 61% said yes, they paid full rent on time, while 39% said no, they did not.
• Beauty (Salons & Barber Shops): Yes: 62%, No: 38%
• Education (Tutoring Businesses, etc.): Yes: 68%, No: 32%

However, those that were most successful in making full rent on time were:

• Real Estate: 81% of real estate agents said yes, they paid their full rent on time, while only 19% said no, they didn’t.
• Finance (Accountants, Bankers): Yes: 80%, No: 20%
• Automotive (Repair Shops, Car Dealers): Yes: 79%, No: 21%

How Did SMBs React When They Were Denied Rent Help?

Finally, we asked people who did not get anywhere with their landlords what they did next. The results highlight even more trends:

• 75% paid what they could
• 8% closed their business and converted to a 100% digital model, working from home
  
• 7% didn't pay rent at all, ultimately hoping for forgiveness
• 6% moved their business to a new location
• 4% closed their businesses permanently

Looking again at different industries, there were a few standouts. Small business owners in most industries paid as much rent as they could to keep their businesses going. That was especially true for:

• Food & Beverage (Restaurants): 83%
• Construction & Home Services: 79%

However, 5% of Construction & Home Services businesses closed for good when paying rent became too challenging to keep the business going. 

Small business owners in more technical or creative work like designers or health and wellness experts were more inclined to close their offices and go digital.

They're working from home remotely and no longer struggling to pay office rent.  As one of the survey respondents said, "Who needs to do that now? Everyone's working from home and it's all working out for us."

While only 8% of all small business owners who were denied the chance to lower their rent converted to a completely digital model, the percentages were over 12% for Designers and Health & Wellness small businesses. 

Rent Stress Aside, We're On The Same SMB Team

That pretty much covers the highlights of this poll.  But there are a few closing thoughts to ponder.

While renters and landlords will often have some tension between them, I was pleasantly surprised to see how many renters empathized with their landlords and vice versa.  Sure there were plenty of angry comments from both sides (in the private comment section of the survey), but there were just as many supportive notes. One hit the nail on the proverbial head: "We're all small business owners and we all need to help each other out, through this weird time."

One of Alignable's rallying cries is "We're Stronger Together" and in the case of small business owners renting and landlords that sentiment could not be more true. So please, as this COVID Craziness continues, please do what you can for each other, so that we can get through this and be in a better position to thrive later. It really is a time to show the best of our humanity -- and not the worst, right?

And to everyone reading this long post, we look forward to seeing your comments below, which could be included in future articles and surveys. Remember, we're all stronger together and we're here with you every step of the way. 

Editor's Note: For more of our research, go here.