Dashboard: The (Commercial) Rent Is Too Damn High

welcome to another 21 hats dashboard I'm Lauren Feldman and I'm here with genan marks to talk about the stories and issues we think business owners should be following this week welcome Jean hello Lauren great to be back with you great to have you here as usual you've been writing and talking about issues that matter to business owners I want to start today with a piece you wrote very recently about what business owners should know about commercial leasing right now as rents and interest rates are soaring what did you find out well this piece came out in the inquire last week late last week and it was um you know I interviewed a few brokers in the Philly area so it's a local you know it's a local piece I've been doing a lot of this kind of Journalism stuff it's weird you know actually talking to people yeah actually talking to people and you know even when I go out and speak around the country you know I talk to a lot of people like actual on the ground reporting um but anyway so I spoke to a few Brokers about the uh commercial lease scene because there was a study that came out from alignable recently that was like 60% small business owners weren't going to be able to pay their rent and by the way albl data I don't have any problem saying this to me is dubious they've come out with studies before that always makes me concerned but whatever it was still enough to raise my eyebrows enough to find out like well is this a problem here in Philly and yeah you know the real just confirm that the the commercial real estate market is tough for small businesses right now because uh you know all the rent abatement is over and landlords are looking for their money they went a long time without collecting it they did so they're coming they it's not this their rental papers were deferred they weren't cancelled you know so they they want their money and um so they're they're putting the they're putting the pressure on their commercial you know customers um and the commercial customers themselves are are finding it a harder and harder time to get um you know you know leasehold space and this is a thing all around the country I mean today's landlords you know they want to rent to somebody that isn't going to uh uh you know be selling products that can be bought on Amazon you know they want like a long-term relationship with their Merchants they they're asking for like fiveyear commitments so they got to be pretty well persuaded that that you that your business plan which you got to share along with your tax returns and projections are going to make sense for them to lease out property to you it's like they're really in the driver's seat and I tell you I also found that a lot of the commercial landlords are willing to not rent they would rather sit on a property and wait for you know a chain to come in you know what I mean or some you know bigger more promising you know you know store as opposed to to someone that they don't have confidence in absolutely yeah so it's it's getting tougher and tougher for small businesses uh to do that um you so there was some advice about you know negotiating you know sharing costs on any kind of build outs and prepare to show your financial information and to have the kind of experien business that they like like coffee shops they like and restaurants and fitness centers because you can't buy those on Amazon you know what I mean the biggest piece of advice I got which I include at the end of the column was uh from both realtors that I spoke to they said uh buy if you can I mean know easier said than done but you know the the best way to keep your you know your leasing cost down is to be your own landlord which makes a lot of sense sure well it gives you a lot more control you're not going to kick yourself out of your own space really does and so that's you know that's what the realtor's advice was do you have any sense for what the market is right now I mean you know this has been a tough time for restaurants and and a lot of retailers you think there'd be a lot of commercial space available but you're saying that in a lot of cases the the landlords are willing to just wait until they get what they're looking for is is this a good time or a bad time to be looking for space so again it's a good time if you got the right business you know it's again they're not going to rent to just anybody you got to have the right business and then it is a good time there is space available space in urban areas like Philadelphia There's space available I mean even though in Philly uh Comcast you know order their workers back to work uh so there's Life coming back on Market Streets and you know and and all of that uh there is um you know and other big companies are also returning to work it's still hybrid and it's just not the same volume as before so a lot of small businesses there are suffering and they were definitely open storefronts uh but in the suburbs it's a different story um depending on the suburban area that you go to um commercial space is tight um you know warehousing space remains competitive uh because of e-commerce sales and and all of that so um it really depends on the kind of business that you have and where you're looking for uh to to lease will determine how hard or easy it is to find space and you personally you've been working remotely for 20 years any thoughts of change in that yeah I hav written a rent check in 2004 so U you know that's that's what it is but again you and I have talked about this before that comes with his pros and cons the pros and cons of having a remote Workforce that is correct that is correct one of the pros is having no rent one of the cons is running the world's most dysfunctional company congratulations thank you next topic uh I think most of us are probably aware that while we like to think of ourselves as a very entrepreneurial people and Country rates of Entrepreneurship have actually been falling pretty significantly uh in recent years until covid yeah and you recently have been talking about uh the uh upturn um a kind of a boom in startups is that a a good thing or is that just born of the desperation from the early days of the pandemic how do you look at that there's I mean it it's absolutely a good thing Lauren I mean you know we should talk about this I mean there's been there's been like 10 million new business startup applications in the past two years and they're on track for another five million this year it's unprecedent it's like double than what it was historically so there's a lot of people starting up business no question that there's some percentage of those people that had to start up a business to you know substantial percentage Yeah no one knows what those numbers are that's the issue are these who are these people really you know what I mean um it's tough to dig down on it I my bet is though besides that group I think the majority of the people are the the the work from home corporate employees I think those employees who for years complain because I'm in so many meetings I'm so slimmed and I'm so busy busy busy and then they start working from home and like oh what do you know they seem to have spare time to like set up a shop on Etsy you know or be an Amazon Merchant it's good to hear your usual empathy for employees Jean I always enjoy that it is I I truly believe that you know corporate workers you know do not work like the workers at small companies and and I and I think once they all got sent home that reality came to light and I think it's showing in the new startup applications because there's I think the majority of them the great majority are like side gate and people that started up businesses again to sell stuff online or maybe maybe drive an Uber or do some kind of freelancing or whatever on their own I think that's the nature of it I think the good news is is that there is a percentage of those companies those startups that will turn into something legit and growing and real you know that will be employing people and and generating significant revenues a percentage and listen with 10 to 15 million new startups in the past two to three years you know if a small percentage of them turn into legit companies even I think that's a good thing you know so sure I I guess the question is do do you there's probably no way to know this but is there any sense that this is a continuing Trend or is just this just a blip because of the unusual circumstances we've been in I think it's it's the work from home thing I think so I I do think it's going to level out and probably decrease as people are getting back to you know their regular jobs um I also think that you know reality is set in for a lot of these existing startups it's I'm sure a lot of them are just G to Fall by the wayside you know because people think they're going to be you know the next Mark Zuckerberg and realize they're they're not so you know I I think a lot of that's going to happen but no I don't I don't think it's going to be a long-term Trend I think we're going to get back to see like the normal numbers that we're used to seeing which is still pretty significant a few million although they had been declining which was concerning yeah uh you know again you know I just don't you know I don't think that it's um I I just think we it was a blip because of Co is what I think it is no I mean it they the numbers have been declining before for covid and and I'm I'm not entirely sure why that was uh why fewer people were starting businesses at that point I'm kind of hoping that this is just introduced a new uh or reintroduced a an alternative into the Zeitgeist and that it will continue to some extent people will good I mean I I hope that's the case I mean neither you or I know we you know we we just we can't really tell where this is going to go I do think um I do think there is a huge number of people people that want to be their own boss I think there is a lot of side gig opportunities out there and I think that Co did prove to a lot of people they can do this it's not as hard as they think um and also proed to others that yeah it is harder than they thought and they're back to their normal jobs but I now that we're in this sort of remote Working World which is definitely you know the reality um if you've got people working from home uh they're going to be screwing around and doing their own thing not you know not doing their jobs and I think that part of will be not all of them Jean yeah not all of them most of them all right next um you recently wrote about the danger of letting your website get out of date and um this kind of hit home with me a little bit I think there's some people including me who like to think um that you know once they've made it through the the pain of getting a website built and working that they can kind of set it and forget it and maybe check back in a decade or two and see how it looks uh you're I think suggesting that not a good idea yeah couldn't be further from the truth that this was another piece I wrote a couple weeks ago for the Philly inquire and I interviewed like a few website designers and they were like you know I mean exactly what you said you can't just like you know create it then forget it um websites take continuous uh TLC and um the new trend with webs not so new I mean it's been around for a few years now is it's scrolling it's mobile so it's not only that you make sure that it's mobile friendly it can be read on a mobile device but the overall design has got to be like a mobile look and feel responsive design right yeah it's like responsive and like so it's like if you go to good websites you're you're just scrolling down it's like one big long homepage you know it used to be you would have a site with the homepage and then you know 8,000 Pages behind it you know what I mean but but the point of it so is so that it works equally well whether somebody's coming from uh a mobile device or from a laptop or a desktop exactly so that's that's the reason why so it is you know you don't want to have like separate you know separate experiences so um so that you need to make sure that that's your your website is updated for that I kind of had a sense that most people were there by now are you suggesting that's not the case no I mean I it's it's a lot of people made that jump but what they did is they you know they they had a mobile site and then they had their regular website you know um and the way to do it is it should be the same website that could detect the you know the device that's accessing it right so a lot of people are making that transition to that reality now and then you got to like you know your search engine optimization your your keywords on your site always have to be updated and looked at you know there's always like broken links which Google penalizes you there's always uh you you slow you know loading Pages um for no reason at all but that has to be investigated and fixed because Google will penalize you there's the colors of the pages as well as a big deal depending on the type of B you know if you run a restaurant the trend is to have mly white on your website because it's you know it's like clean you know what I mean so there's all these things and and I I learn that the hard way and I have a website designer and you know I pay him an annual fee you know to maintain my website and then I pay him extra to do extra stuff and I'm constantly using him I mean you know people are like why don't we just use like Wix or you god daddy which is fine if you just have a super super simple site like you just want to have you know like a like a you know some some geography named you know what I mean you know for your business but if your website does a little bit more than that it's providing content and has some kind of like Dynamic content on it you're going to have to have a website designer keep a close eye on it we we've talked previously about the um the challenges of uh American Disability Act uh compliance on your website and how frustrating that can be especially when you start getting hit with letters from lawyers and the threat of litigation um is is that something that you can just fix have right and then forget it or is that also something that you have to keep up with also something that has to be yeah continuously updated and just to make sure that that we're all aware I mean you know there's there's this you know Boutique industry of awful lawyers that look at sites including small business sites they see that it's not um not in compliance with the American Disabilities Act which means that you know the site has got to be able to be accessed by people with disabilities a good cause absolutely and then they write letters to you saying that you're not in compliance and they're going to report you to the government unless you you know settle with them you know what I mean they have a client that's very upset about it so you got to be careful because there's a lot of those types that are out there and you're it's it's easy easy exposure so um another reason why you need to have a good website designer involved to make sure that you are in compliance with the Ada for sure you know there are a few things I talked to business owners about that they find more annoying than dealing with that particular topic last topic last week the FED raised interest rates again as we all heard yeah I think you know about this uh does the does the latest hke genene change what you've been thinking about the economy at all uh I had the sense in part from talking to you that you know maybe this isn't going to be as bad as everybody's predicting um but then inflation took a bigger leap than expected Ed and then there was the the the the rate increase and now I'm hearing more and more talks from you know like the big boys on Wall Street like Goldman Sachs and places like that that they're expecting this uh to be a pretty serious hit that's coming our way yeah I you know the the reference I made is that this this is not going to be the Great Recession of 2008 2009 where you had a bubble that was driving it all you know um it's going to be a tough year I mean I um have a a a piece um that's coming out early this week in the Washington Times um where I wrote we'll probably talk about it when we speak again uh that you know all the reasons why this year is going to be a tough one for small businesses and I have the year coming the year coming yeah that's coming in and and interest rates are one of them it's it ain't going to make things easy I will tell you this much there Lauren it is um when I T this week I was in West Virginia speaking to the you know a bunch of Foundry you know manufactur of Foundry systems and then I was in Dallas talking to credit unions and then I was in Charlotte talking to a bunch of dealers for Inger Soul Rand you know tools and equipment you know so these are all business owners and they're all braced for more interest rate increases and nobody's upset by it they're not happy about it but across the board the the the sense that I get is that it's something that needs to be done do you know what I mean um it's like rehab you know like you know you you have you you you you have a bodily injury and you have to go through two months of rehab so you can walk again normally to get the inflation out of the system yeah it's exactly right and we're already seeing I mean the credit unions I spoke to were saying how like demand has been decreasing for loans because rates have been going up which is exactly what chairman pal wants to happen uh because it eases the pressure on the money supply um and that so it's these this is all medicine that needs to be taken I think the biggest argument that the Republicans make is that the Biden Administration didn't do this early enough you know and whatever but whatever it's being done now um it's you know it took a year and a half for inflation to get to the levels that it's out now and it's going to take you know another good year year and a half maybe for it to get you know to to really be under control to really be down to hopefully that four to five percent level um and that doesn't include any potential issues with Ukraine or you know other things that are not foreen well I mean that is the thing I mean I understand the pain of inflation I believe me I I I'm feeling myself but you know gas prices have come down quite a bit and some of the inflation we're dealing with is the result of the the war in Ukraine and um and other things outside our control that are not going to be affected by by the rate increase at least not directly uh the idea of forcing ourselves into recession to to solve the inflation problem is a little painful well the inflation was caused by you know really three things um number one is supply chain issues right because when you have less of a supply of something and more demand which is came in the aftermath of covid it was was correct yeah yeah but we're still seeing the effects of that right now China just reopened Chen Xiao or you pronounce the city I can't even pronounce the city and there's like 80 billion that was a beer you just referred to yeah okay maybe but they you know so there's no guarantee that they're not I mean somebody in China gets the sniffles and they shut down entire metropolitan areas you know so there is still supply chain issues that that you know are still being worked out that's number one number two is is that obviously energy is a huge part of inflation and uh the war in Ukraine has Prov you know has has really contributed to all that volatility um the the costs of energy have gone down mainly because uh there's been a worldwide slowdown in demand so again everything is demand and Supply demand and Supply demand and Supply so there's been you has been able to catch up a bit of energy the issue is uh if Supply is going to be strangled more in the winter if Russia decides to cut off its energy to Europe um that could have you know you know volatile effects on the price of energy here so it's supply chain is one energy is the other um and then number three is you know fiscal policy and there's been you know $6 trillion dollars that the fed's balance sheet is increased from 15 trillion to almost 22 trillion uh since the beginning of covid it's unprecedented and I I want I want you to know a lot of it is what is good uh it was it was it was Aid that was provided it was liquidity that was provided you know to the economy I'm not I'm not arguing with it there are a lot of small businesses with much better balance sheets than they would have otherwise 100% paycheck protection programs stimulus programs I get it obviously there people are going to argue about the excessive stimulus payments that were made and all that those are the ones that go to someone else yeah that's right but but the bottom line is though is that there's a lot of money washing around in the system that's chasing it's a a lot of supply of dollars that's chasing too little Demand right now so because of that you know when you have something that is an over supply of something the value of it goes down that's inflation so it's those three things that happen so you know the FED is taking steps to pull back on the supply of dollars by not buying back bonds and making in you know making the the liquidity that much less because it's more expensive to to borrow and bring more money into the system so that gives it a chance to catch up on its balance sheet um hopefully uh you know things will work out volatility wise with energy but that's that's a real wild card but the supply chain issues is working out so that's it gets back to it over the next year to year and a half I think these things are will be working its way out it's just going to be a tough year while that happens and you know but having said that I just I'm not you know and really I look around the room Lauren I wish you were with me there are hundred people running you know these you know running Distributors of you know for ingersol Rand and by the way it was a hundred white middle-aged men I just want you to know that own these companies right that's another whole conversation um but they're all none of them are panicking you know but they know that this next year is going to be you know it's going to be a tough year but they're not you know back in 2008 2009 people are panicking right you know it's just a different environment I I do look forward to the day when we can talk less about the economy and more just about what it takes to run a business I know I know I know you know with the recession hanging over us and it just seems like the conventional wisdom changes every few days or every few hours um so we keep coming back to it hopefully that will eventually pass isn't it amazing how like we you know you say the conventional wisdom it it is amazing that you know people have been buying and selling Goods to each other since the times of Cleopatra you know I mean even the Industrial Revolution was what like in the mid you know 19 Cent you would think by now we would have the systems in place to figure out and navigate our way around economic upturns and downturns I that's a great point I always go back to the the famous line uh you know economists have predicted nine of the last five recessions yeah that hasn't changed it hasn't changed I mean I guess it's like the weather I mean there are still certain things are you know out of our control do you know what I mean that we just will never be able to 100% accurately um see it uh the only good thing I think about it is uh when when recessions hit before they were called panics you know that's a good point they just came they just came and people were like we're screwed you know I mean the economy is down people it just happens here at least there is more you know it seems like there's a little bit more warning you know you're running a business now there's not a single business owner that I'm talking to now that isn't aware of where that the economy is slowing down and interest rates are going up and inflation is higher and they can make some judgments based on that I don't think if we were running businesses even a hundred years ago we would have had that kind of information to help us run business that's a good sign right you're right and on that note genan marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times Forbes and entrepreneur you can also hear them on ABC radio's eye on the world with John Bachelor Jean hosts two small business podcasts with paychecks Corporation and the Heart it thank you Jean thank you Lauren we'll speak soon have a great week everyone