Majority of Retailers & Businesses Not Able to Pay Rent as Costs Accrue Amid Reopenings

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Commercial rent continues to be the most critical aspect of many businesses in Canada as they struggle to survive through the COVID-19 pandemic.

The Toronto Association Of Business Improvement Areas, in partnership with other groups, has been conducting surveys around the issue and the results are striking for the future of many of those small businesses.

The latest survey, which included businesses in Toronto, Guelph, and Ottawa, found that 72 percent of businesses could not make all of June’s rent while 63 percent did not pay all of May’s rent and 50 percent April’s rent. Also, 78 percent of businesses feel they will not make all of July’s rent.

It’s a growing number and an increasingly worrisome situation.

John Kiru, Executive Director of the Toronto Association of Business Improvement Areas, said each of the recent surveys got progressively higher in terms of businesses having challenges.

“It confirmed what our expectations were. The bottom line is that we felt 40 to possibly 50 percent of the businesses on Main Street will likely fail if this pandemic went three to four months,” said Kiru. “What these surveys have shown is that we are on that trajectory.

“Small businesses traditionally have one to two months staying power in terms of paying bills, in terms of paying their rents. That third survey brought those numbers forward for us. The third one also included beyond Toronto as we also reached out to Ottawa and Guelph. We wanted to show that it’s not a Toronto centric problem and that it’s not an urban centric problem. That these questions were relevant and the actual numbers for communities right across the province.”

Kiru said the longer the pandemic environment continues the recovery of existing businesses on Main Street will be tougher.

“We will lose those businesses no doubt about it,” he said. “Recovery is not only going to have to focus on reopening our businesses and advocating for some infusion of dollars to help these businesses recover, continuation of some of these programs such as the wage subsidy to give to restaurants. You don’t just flip a switch in these businesses. You need some time to get your feet underneath you to build your cash flow.

“Our recovery is no longer focused on simply reopening existing business people. It will continue to be that but also added to that is another layer and that is filling the vacancies that have been created as a result of this and filling those vacancies in a way that balances the neighbourhood and makes it still an attractive destination for people to come out and visit.”

Stephen Maciejowski, Director of Operations & Special Projects Old Town Toronto / St Lawrence Market Neighbourhood BIA / King East Design District, said he too found it interesting and concerning the number of businesses that each month are finding it increasingly more difficult to pay their rents.

“It tells me that people are slowly running out of the cushions they may have had and they’re trying to figure out who do I pay with the little money I have left in order to try and stay afloat,” said Maciejowski. “For some of them, they’re running out even if they were able to get that $40,000 loan (from the federal government). That only lasts so long especially in downtown Toronto.

“For a lot of them they’re wondering if they really want to go further in debt to try to save the business when they don’t know when they’re going to be able to open again and how long it’s going to take them to get it back up to somewhere even close to operating at 100 percent.”

The survey’s key recommended actions are:

• Enact a provincial moratorium on commercial evictions OR make the Canada Emergency Commercial Rent Assistance (CECRA) program mandatory OR take the lead from BC and enact a moratorium on commercial evictions for landlords who are eligible to apply but choose not to;

• Process to apply is cumbersome, unclear, application portal has had issues and landlords are resistant to releasing their financial and other documentation;

• Allow commercial businesses/tenants the right to apply for the program;

• Landlords don’t want to contribute 25 percent to the program. This amount needs to be reduced or allow landlords and tenants to negotiate the best way to cover the remaining 50 percent; and

• Reduce eligibility criteria, not all businesses have lost 70 percent, even 30 percent revenue loss is significant for most of these small margin businesses.

Some other key findings from the survey include:

• 42 percent of businesses do not qualify for the wage subsidy; 28 percent do not qualify for the $40,000 loan; 36 percent do not qualify for the rent assistance and 11 percent do not qualify for any of the government programs’;

• Almost 70 percent of businesses have relied on the government loan to cover expenses;

• 61 percent of businesses who qualify indicate their landlord has not applied for the rent assistance program;

• Of those who have not applied, 62 percent of businesses think their landlord will not apply for the rent assistance program;

• 41 percent of businesses who needed rent accommodation indicate their landlord did not accommodate them;

• 29 percent of businesses are concerned about being locked-out (down from 43.9 percent in May’s survey);

• 95 percent of landlords did not receive all of June’s rent (81 percent did not receive all of May’s rent and 74 percent April’s rent, per previous surveys);

• 85 percent of landlords feel they will not receive all of July’s rent;

• 71 percent of landlords do not qualify for the wage subsidy; 63 percent do not qualify for the $40,000 loan; 28 percent do not qualify for the rent assistance and 14 percent do not qualify for any of the programs;

• Less than 40 percent of landlords are benefiting from the available financial programs;

• 52 percent of landlords who qualify indicate they have not applied for the rent assistance program; and

• Of those who have not applied, 33 percent of landlords indicate they do not plan to apply for the rent assistance program.

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