The sharp decline expected in tourism will likely result in massive losses for South Florida restaurants and hospitality-focused retailers, jeopardizing their ability to pay bills.
According to Visit Florida, tourists spent $88.6 billion in the state in 2017, including $20.2 billion in food and beverage, $15 billion in shopping, $11.3 billion in entertainment and recreation, and $24.3 billion in lodging.
The spending in Southeast Florida alone was $32.5 billion.
COVID-19, commonly referred to the coronavirus, has caused in a drastic reduction in air travel and a ban on travel from most countries in Europe. Even flights to South America have been scaled back by most airlines.
Hundreds of meetings, events and conventions, which typically boost local shopping and dining, area also canceled.
All of the cancellations, combined with a slow down in tourism, will trickle down to local businesses that depend on those dollars to pay rent.
While there hasn’t been much disruption for tenants yet, it’s likely coming soon, said Katy Welsh, senior director of retail services at Colliers International South Florida and state operations chair for the International Council of Shopping Centers.
“At this point we are all bracing ourselves and preparing to help tenants make it through this time,” Welsh said. “I’m sure tenants will ask for rent relief, like they did in the downturn of 2008 and 2009.”
Most agreements with a landlord and tenant include a clause allowing the landlord to terminate the lease early, she said. Landlords rarely have an obligation to help tenants impacted by the pandemic.
Jaime Sturgis, founder and CEO of Native Realty in Fort Lauderdale, said COVID-19 concerns will hurt business at many restaurants, stores at enclosed malls, and movie theaters.
He added that many small businesses don’t have 30 or 60 days of cash reserves, but some restaurants will try to make up for lost foot traffic by boosting their delivery business.
On the other side, property owners have their own bills to pay. Their mortgages, insurance and property taxes don’t stop just because their tenants are struggling, Sturgis said.
“Short of some type of stimulus from the government, it will put a lot of people in a precarious situation,” Sturgis said.
Daniel Chaberman, head of Grupo Eco, said business at this Atlantic Village retail and restaurant center in Hallandale Beach was great last week, but dropped a bit this week. He expects to see larger impacts in the coming weeks.
Chaberman said all of this tenants have business interruption insurance. However, experts say these policies may not cover the coronavirus.
“We will try to help the tenants as much as we can,” Chaberman said. “If the tenants do well, we are going to do well.”
If tenants experience a significant reduction in sales, his real estate company will listen to them and try to find a solution, said Claudio Mekler, co-founder and CEO of Sunrise-based Miami Manager, which owns five shopping centers in South Florida.
“Should a tenant need help, we will work with them and design solutions based on hard data,” Mekler said. “Unlike the enclosed shopping malls, our tenants, for the most part, sell convenience goods and personal services that meet the daily needs of those living in the neighborhood. For that reason, we think they will be more protected than other retailers when it comes to a slow down in sales.”