Here’s what Philly small businesses should know about leasing

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According to a recent survey conducted by business networking platform Alignable, nearly 40% of over 7,300 small business owners were surveyed. Said I couldn’t pay the rent last month. Unfortunately, that number has increased by about 6% since his July.

The companies surveyed cited a combination of factors, including skyrocketing rents and rising material and labor costs.

For landlords on the other side of the equation, they [rent] Alignable’s head of research and communications, Chuck Casto, said in an interview with, “We slid for a year and a half during the pandemic and did what we could.” CNBC last month. However, the landlord has a mortgage on it that needs to be paid to the tenant, he said.

That’s certainly an ominous sign. Is the same rent crisis hitting small businesses in the Philadelphia area?I spoke to her two commercial realtors in the city, who represent hundreds of small businesses and merchants. Both companies agreed that market volatility was high and several small businesses were being forced out of their places as a result.

“One of the dry cleaners I know in Lower Merion was recently evicted from her property because she couldn’t pay the rent. Keller Williams We specialize in both Mainline and Center City residential and commercial real estate.

Kristie Bergey, Broker and Owner KB ExperienceA Philadelphia real estate company.

“The commercial real estate market is clearly down in many parts of the Philadelphia area,” she says. “But it’s not like landlords are giving tenants a rest,” she added. “They would rather hold the property and wait for the right tenant (such as a well-known restaurateur or chain) to make that commitment.”

According to Bergey, many clients prefer to lease space for more “experience” properties such as coffee shops, fitness centers and restaurants.

“Landlords have become very picky about what kind of clients they take a chance on, especially after the incident,” she says. I have.”

It’s getting harder for small businesses to rent commercial real estate or even maintain existing leases this year. A survey by Alignable found that 45% of small business owners said they were paying at least 50% more rent than they were pre-COVID, and 24% reported doubling the rent charged by their landlords. and 12% are now paying more than three times what they did before the pandemic.

Unfortunately, the city government offers little support to merchants facing these challenges. The city of Philadelphia offers loans, education, coaching, marketing and other services to help businesses acquire commercial space, according to a spokesman for the Philadelphia Department of Commerce. However, the department does not provide small businesses with funds specifically to cover or subsidize rent.

So what’s the best strategy for small businesses looking to keep their leasing costs down in a world of slow economic growth and high inflation?

First, both realtors say it’s important to do research so they can really understand their customer base and choose the right location in the right demographic.

Also, be prepared to be completely transparent with prospective landlords. Providing historical business information, financial statements and tax returns is a common request and can give landlords more peace of mind that your business will continue for some time.

Most landlords usually ask for a minimum five-year lease, so be prepared to commit, too.

Small businesses should also be prepared to negotiate sharing of potential construction and refurbishment costs. This is always considered part of the deal. Also, if you are granted a lease, allow enough time to arrange permits and other clearances with local authorities. You can time it so that

All of these tactics set you up for getting the best possible commercial lease. But according to both Bergey and Michels, there are even better tactics if you can afford it. it’s a purchase.

“Obviously, interest rates are a little higher now, but even if you’re stuck on a mortgage, you know what your monthly payments will be, and that won’t change,” says Michels. “Once you buy, you’ll have more control over your costs and may benefit from the valuation of your property.”

Burgay agrees. “You’re always better off being your own landlord,” she says.

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