If majority of eateries/bars/salons etc. went out of business, what would happen?

[destroycreate]

I am not an economist, but having spent a lot of time here in miserable Los Angeles, where most of the city is still extremely dead 7 months in, it is breaking my heart to see so many businesses I love permanently closed. All the things I love to do here, I for the most part can't.

I just do not get how this will be sustainable if we go on even just 2 more months.

Imagine lockdowns were to persist for another 6 months, killing the majority of businesses that don't have the luxury of outdoor seating etc. People forget massage places, spas, salons etc. are also greatly affected. Landowners continue to charge high rents in places despite businesses not making money.

Eventually though, if so many people end up poor, jobless, and there aren't really businesses to afford such rents, what do you think landlords would do...because ultimately, who will really have capital to start up anything? Do you think there would be huge incentives to restart the economy like landlords offering several months free rent? I'm curious to hear your predictions/thoughts on how cities could "restart" in this new economically devastated landscape.

[iheartthed]

Originally Posted by destroycreate

Imagine lockdowns were to persist for another 6 months, killing the majority of businesses that don't have the luxury of outdoor seating etc. People forget massage places, spas, salons etc. are also greatly affected. Landowners continue to charge high rents in places despite businesses not making money.

Eventually though, if so many people end up poor, jobless, and there aren't really businesses to afford such rents, what do you think landlords would do...because ultimately, who will really have capital to start up anything? Do you think there would be huge incentives to restart the economy like landlords offering several months free rent? I'm curious to hear your predictions/thoughts on how cities could "restart" in this new economically devastated landscape.

Landlords can only get away with charging what tenants can/will pay. If everything collapses then landlords will have to lower their rents.

[mrnyc]

the problem is, many landlords in ny are very wealthy and can sit on their empty properties for a long time while arranging for the best tenant.

[iheartthed]

Originally Posted by mrnyc

the problem is, many landlords in ny are very wealthy and can sit on their empty properties for a long time while arranging for the best tenant.

But this is still dependent on demand. If all landlords waited for a certain tenant that doesn't come then they will all be sitting on worthless properties. If there is a tenant that comes and meets their criteria then there is market demand. The scenario that there is somehow a market collapse and also demand is illogical.

[mrnyc]

Originally Posted by iheartthed

But this is still dependent on demand. If all landlords waited for a certain tenant that doesn't come then they will all be sitting on worthless properties. If there is a tenant that comes and meets their criteria then there is market demand. The scenario that there is somehow a market collapse and also demand is illogical.

yes but with low demand and that many owners can wait out anything until the heat death of the universe doesn't help.

[iheartthed]

Originally Posted by mrnyc

yes but with low demand and that many owners can wait out anything until the heat death of the universe doesn't help.

Ideally landlords should act in self-interest at some point and readjust their tenant requirements. But this doesn't protect the tenants who could get crushed in the process, through no fault of their own. That's a government policy problem, not a market problem.

[mrnyc]

Originally Posted by iheartthed

Ideally landlords should act in self-interest at some point and readjust their tenant requirements. But this doesn't protect the tenants who could get crushed in the process, through no fault of their own. That's a government policy problem, not a market problem.

low demand is the market problem.

[park123]

If most places went bankrupt, new places would just pop up in their stead within a few years. That's secretly what a lot of policy makers think. Who cares if restaurants go bankrupt, there will just be new ones opening in their place.

An analogy - Germany in 1945 didn't just have their restaurant and nail salon industry wiped out. The entire country was a smoldering ruin. Same with Japan. Yet within 5-10 years, the GDPs of both countries exceeded their pre-war peaks. If Germany could rebuild their entire country, we can re-open restaurants in Manhattan. Of course that doesn't help all the existing restaurant owners who go bankrupt in the process, but thank you for your sacrifice (although even the thank you is never given).

[iheartthed]

Originally Posted by mrnyc

low demand is the market problem.

By not a market problem, I mean that demand is artificially altered because of the pandemic and the government policies that require altered behavior. When the pandemic is over, the altered behavior is over. What the government has not done so far is offer protection for businesses that cannot meet obligations because of government rules. For instance, a restaurant is paying for indoor space in NYC that they haven't legally been able to use for 7 months, but the government hasn't frozen commercial evictions nor frozen lease payments for restaurants. They have mostly left it to landlords and tenants to work it out themselves, even though the government made the rule.

[mrnyc]

when the pandemic is over is quite unknown. people say 2021 like its fact and its not of course. in the past they have typically lasted for several years.

also per everything i have read lately the market is permanently altered. ie., work from home vs office space, amazon vs small business, etc.. it remains to be seen to what extent of course, but as it goes on post pandemic is looking more like a new world than some people would like to think.

[park123]

Originally Posted by mrnyc

when the pandemic is over is quite unknown. people say 2021 like its fact and its not of course. in the past they have typically lasted for several years.

also per everything i have read lately the market is permanently altered. ie., work from home vs office space, amazon vs small business, etc.. it remains to be seen to what extent of course, but as it goes on post pandemic is looking more like a new world than some people would like to think.

I think Covid definitely sped up the shift from physical retailing to online shopping, although it was going to happen anyway. I'm not so sure about anything more than that. The suburbs will still be boring in 2023 like they were in 2019. I'm not sure about work from home vs from office, but I suspect that working from home long term erodes interpersonal links and results in poorer company performance. We are just coasting on the built up social/interpersonal capital from pre-pandemic right now. It's fine for 6 months or a year, but it might have deleterious effects over the long haul that will result in only minor shifts to home work after this is over.

[mrnyc]

Originally Posted by park123

I think Covid definitely sped up the shift from physical retailing to online shopping, although it was going to happen anyway. I'm not so sure about anything more than that. The suburbs will still be boring in 2023 like they were in 2019. I'm not sure about work from home vs from office, but I suspect that working from home long term erodes interpersonal links and results in poorer company performance. We are just coasting on the built up social/interpersonal capital from pre-pandemic right now. It's fine for 6 months or a year, but it might have deleterious effects over the long haul that will result in only minor shifts to home work after this is over.

in the meantime a bazillion mom and pops and restaurants have been decimated, with more hanging on by a thread. will they come back at prior levels in an amazon dominated world? even something like transit, like mta, uber/lyft and airlines despite bailouts are wacked. will we need them so much someday post plague in a smaller office footprint environment? who knows?

you know its bad when chuck e. cheese goes under. chuck e. cheese people!!!

https://nypost.com/article/the-coron...rs-and-losers/

[eschaton]

Without some sort of federal aid to get new businesses of this sort on their feet post-pandemic, the answer is basically much greater market concentration within the industries, as chains with deep enough pockets to survive (or entirely new chains constructed by venture capital) move in on the market share formerly taken up by smaller businesses.

[Crawford]

Chuck E. Cheese is obviously having trouble because its entire business model is getting grubby kids in close quarters together for parties. Total nonstarter during pandemic.

Same with Dave and Busters and the like.

[park123]

Originally Posted by eschaton

Without some sort of federal aid to get new businesses of this sort on their feet post-pandemic, the answer is basically much greater market concentration within the industries, as chains with deep enough pockets to survive (or entirely new chains constructed by venture capital) move in on the market share formerly taken up by smaller businesses.

I think this is right. It's hard to create a new class of restaurant entrepreneurs from scratch in a few years (how did Germany and Japan restart their small businesses after the war? Where did the capital come from?). But it's much more possible for large chains to expand with venture capital and bank funding.

In NYC, restaurants were already trending away from mom-and-pops to restaurant "groups" of 5-10 restaurants managed in a more professional way, because of increases in rent and regulations that were hard for true newcomers to manage compared to before. After covid, if a lot of places close (but isn't most of the USA doing ok?), it will be the chains with deep pockets that can expand. Like a meteor killing off the dinosaurs, but instead of small mammals you get Chopt and upmarket brands from McDonalds or something.

[park123]

I also have a feeling upmarket chefs/restaurant owners will be able to get financing to open up again, even if some of them lose almost everything now. Financing from banks, from angel investors locally, etc. So rich people and/or those who like fancy restaurants will be fine.

But true mom-and-pops will struggle tremendously, and many will lose absolutely everything, including their houses and personal assets as leases almost all have personal guarantee provisions these days. But it was in a good cause. Thank you for your sacrifice guys, while I sit at home here in pajamas in my socially distanced office job (j/k).

[JManc]

I think Covid is shaking off a lot of dead weight. Other than the hotels, airlines and ride-shares, much of these companies were losing market share for years...I mean, the last time I shopped at JC Penney, I was with my grandmother and Chuck E. Cheese; I remember their pizza tasting like cardboard when I was 8. The movie theater industry has been struggling for years with mediocre movies and outrageous ticket/ food prices.

[sopas ej]

Originally Posted by park123

An analogy - Germany in 1945 didn't just have their restaurant and nail salon industry wiped out. The entire country was a smoldering ruin. Same with Japan. Yet within 5-10 years, the GDPs of both countries exceeded their pre-war peaks.

Germany also had the Marshall Plan (as did other European countries of course), and Japan was occupied by the US for 7 years after the end of WWII (or until the 1970s if you include the US occupation of Okinawa) and the US helped rebuild their economy---and also wrote their constitution, while keeping Soviet influence away...

But I don't know if the Marshall Plan had anything to do directly with helping small businesses.

[park123]

Although I live in NYC and don't like Cuomo at all, and didn't even before Covid, I'm going to be "that guy" and blame Trump and the Republicans for this. What should have happened was a rent freeze or graduated reduction based on need, coupled with property tax and other relief for landlords. But people like Cuomo won't even talk about this, because the states would go bankrupt and be forced into massive lay-offs without their tax receipts.

The Federal government should have bailed out the states, because while states cannot print dollars, the Federal government luckily can (and often does). It's called "borrowing" and "Federal debt", but it's really just an electronic creation of liabilities that can be zeroed out anytime in the near or far future, accompanied by the screaming of Austrian school economists and goldbugs everywhere. Hyper inflation will surely result, just as it was predicted to do in 2008 and many times in the past. When you have the world's reserve currency, there are downsides like a strong dollar hurting your tradable goods sector competitiveness, but it's more than offset by all the free shit you get from foreigners willingly giving you their products in return for nothing but electronic (not even paper!) dollars.

[iheartthed]

Originally Posted by park123

Although I live in NYC and don't like Cuomo at all, and didn't even before Covid, I'm going to be "that guy" and blame Trump and the Republicans for this. What should have happened was a rent freeze or graduated reduction based on need, coupled with property tax and other relief for landlords. But people like Cuomo won't even talk about this, because the states would go bankrupt and be forced into massive lay-offs without their tax receipts.

From what I've heard, the landlord lobby has pressured him to not do more. I didn't like him either before, and don't really like him now, but I respect him as a competent manager.