The next big problem for the economy: Businesses can’t pay their rent

The situation is especially dire for owners of hotels and malls. Such retailers as Bed Bath & Beyond, Famous Footwear, H&M, and the Gap, movie theaters AMC and Regal and gyms like 24 Hour Fitness stopped paying rent entirely in May, according to Datex Property Solutions. Starbucks paid May rent but also sent a letter to landlords requesting landlords to make concessions starting June 1 and continuing for 12 months.

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Overall, Datex found that 58.6 percent of retail rents were paid in May. Office and warehouse tenants are still paying rent for now, but there remain concerns about whether tenants will renew leases as working from home gains in popularity.

“Social distancing means financial Armageddon for commercial real estate and municipalities in coming months,” warned R. Christopher Whalen, head of Whalen Global Advisors, on his blog for investors. He predicted defaults could be worse than the peak losses of the early 1990s commercial real estate bust “by a wide margin.”

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