Although business optimism has risen dramatically from last year, some small retail businesses and sectors are continuing to struggle—with factors such as the Delta variant now potentially throwing an additional wrench in the works.
In June, a Capital One Business Survey found that 72% of business owners nationwide believe their company's financial situation is the same or better than before the COVID-19 pandemic. That's a nearly a 20-point jump from the 53% recorded in late 2020, according to a report in Inc.com.
Regionally, local experts are reporting similar levels of confidence from business owners, with the caveat that some industries are still struggling post-pandemic and now are contending with uncertainty as the Delta variant virus spreads.
The level of confidence depends on the sector, said Kevin Kramer, Kansas and Missouri market CEO for BOK Financial®. "Accountancy and other consultancy firms, as well as anyone involved in healthcare, including pharmaceuticals, are pretty optimistic going forward," he said.
Business owners in manufacturing, automotive and anything related to the medical industry are experiencing the most optimism, said Bruce Guest, BOK Financial's regional commercial banking manager for Arizona, Colorado and Oklahoma.
Consumers' appetite for home-delivered goods also has been boosting some areas of the commercial real estate market, such as the demand for industrial warehouse space, said Dan Easley, executive director of commercial real estate for BOK Financial. He notes that retail businesses that survived the pandemic are particularly strong, and that some empty retail spaces are getting new tenants.
"Retail businesses in a higher [income] demographic tended to survive the pandemic," said Easley. "The businesses located in areas where people live who lost their jobs more—blue-collar and service-orientated workers—have suffered somewhat."
The health of the office space market depends on location, as well as the amenities of the property and what's around it, Easley said. "It's a property-by-property decision. Buildings and locations where you can spread out, either inside or outside, are leasing out at a fast pace."
"Office users also really want things like a common area for conversation, fitness facilities and a nice place to eat," he said, adding that older high-rises are having more difficulty finding renters.
Slow to return for some
Some industry sectors are continuing to struggle, despite the confidence noted in the nationwide survey. For example, the aerospace industry is slow to return due to the pandemic's impact on travel and the reduced need for airplane maintenance, Guest said. Also, the entertainment and service industries, including venues and suppliers, are still struggling.
Restaurants and small retail businesses also are less optimistic than they were before the pandemic—and even less confident than they were three months ago—because of concerns over the Delta variant and another potential shutdown, Kramer said.
Guest and Easley agreed the Delta variant is the wild card. "The biggest thing impacting confidence in the last couple weeks is whether a potential shut down could come back and affect certain markets," Guest said. Easley added that the Delta variant has "caused people to kind of pause."
Although the Capital One survey was released July 27, it was conducted in early June, before nationwide concern over the Delta variant of COVID-19 began to grow, potentially dampening some optimism.
Staff shortages
The Delta variant isn't the only trouble spot. Business owners are also struggling with staffing shortages and slow supply chains.
The No. 1 issue facing business owners is a shortage of workers, according to Kramer. In response, businesses are looking to increase wages and still make money, but they're also trying to find non-pay-related incentives, the most successful of which creates community in the workplace, he said.
"Companies are finding success with community-building activities such as company picnics and other gatherings, but group-oriented events will also be threatened by the Delta variant," Kramer said.
"Signing bonuses are really sort of becoming the norm right now," Guest added, also noting an increase in expanded benefits, including work-life balance and flexible work arrangements."
Supply-chain issues run a close second to staffing shortages and are a frequent topic in the conversations Kramer has with businesses. He noted shortages in lumber and foam in particular among his clients in Kansas and Missouri.
Guest also cited shortages in anything related to HVAC—including steel, aluminum, copper, and plastics—in markets with excessive heat such as Arizona, Colorado and Oklahoma, as well as shortages in the pool supply and automotive industries.
And business owners may feel the impact of these shortages for months to come. Kramer noted that some freight containers are taking 120 days or more to get to facilities, forcing companies to seek out other providers while they wait. The companies will still be on the hook for the containers when they arrive, which may lead to an inventory overload in the coming months.
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