Don’t feel bad if your small business is having trouble paying rent right now. More than 40% of retail renters nationwide didn’t pay their rent in the month of May, according to a just-published Washington Post analysis. The Post found that even big brands like Starbucks, Bed Bath & Beyond, 24 Hour Fitness, and many other household name chain outlets have been unable to pay their rent on time amidst the coronavirus economic downturn. Some commercial tenants are fortunate to have a flexible landlord willing to work with them on the tricky topic of full payment. Other small businesses that rent their spaces are not so lucky and may be forced to explore other options. If you’re not able to work with your current landlord, be aware that prices on the small business rental markets are dropping significantly. On top of that, analysts expect the downward trend on rent prices to continue for months, if not longer, so we probably haven’t seen the bottom yet. Now is certainly a difficult time to move or relocate your business or to consider opening a business at a new location. But if you’re in a position that you’re determined to do so or if circumstances are forcing you to, this is the best time in more than a decade to find affordable commercial spaces to rent. Negotiate Before Leaving a Lease (Unless You Can’t) Small businesses nationwide are asking for a break on rent, and many are getting it because their landlords are financed by traditional commercial mortgages with banks. Banks have often been patient and understanding. But some leases are owned by financial entities called commercial mortgage-backed securities (CMBS) that have a complex ownership structure involving numerous investors that make exceptions to a signed contract very complicated. “This really is a tale of who is your lender?,” real estate investment banker Andrew Little told the Post. “If you have a bank lender or an insurance company lender, you can probably get through this and hopefully get to a point where things start bouncing back. If your lender is a Wall Street CMBS lender, you are in trouble.” Are Small Business Rents Dropping? Yes, commercial rents are dropping significantly for the first time since 2008. A New York Times study found commercial real estate values dropped by a shocking 9.4% on average just in the month of April alone. That’s almost a double-digit percentage drop in only one month. The severity of the drop varies by the type of rental location. Shopping mall storefront rent prices plummeted by a whole 25% in April, and strip mall rent prices dropped by 15% that same month. These are national averages, and prices will differ by region. Rents are expected to continue falling for the next few months, if not longer. Some businesses may find it more efficient to keep their employees working from home, which may lead to even more commercial vacancies. So the rental market probably hasn't yet hit its low point. Eviction Moratoriums Driving Down Commercial Rents One thing we’ve learned in the past is that rental prices are sure to drop when there’s an eviction moratorium in place. Right now, small business tenants cannot be evicted thanks to commercial eviction moratoriums in New York, Los Angeles, San Francisco, and a number of other large US cities. The entire states of Florida, North Carolina, and Washington are under commercial eviction moratoriums, and California is considering their own statewide commercial eviction ban. Some of these bans will probably end soon. Others will continue to provide eviction protections for much of the rest of 2020 or even well into 2021. When landlords are legally prohibited from evicting small business tenants, that creates much less demand for their other vacant properties. Landlords simply cannot remove their other business tenants. If your city or state has an eviction moratorium in place, it will be a renter’s market for as long as that moratorium is in effect. Paying rent will also be easier under new changes to the Paycheck Protection Program (PPP). These changes will greatly increase the percentage of fully forgivable loan money you can spend on non-payroll costs—including rent. Those changes passed Congress and President Trump just signed them into law. More PPP funds are still available, and you can still apply for a PPP loan. Of course, rental prices are plummeting because many businesses cannot even afford reduced rent in the current economic environment. If worst comes to worst, you can try to run an online-only store until conditions improve. Commercial property landlords are falling on hard times too, driving rental prices downward. Now may be the time to move if you’re considering a new storefront, and SBA loans are still available to help finance your new start.