Recent data from small-business networking site Alignable revealed that commercial property rents are becoming untenable for a startling share of small-business owners.
The company performs a survey of more than 4,000 randomly selected small-business owners to compile its monthly Small Business Rent Report. In May, it found that 37% of small-business owners in the U.S. couldn’t afford to pay their rent on time and in full.
This figure includes 45% of retailers (up 4 percentage points from April) and 44% of construction businesses (also up 4 points). Lodging and travel businesses saw the worst monthly spike in delinquent payments, up a staggering 20 percentage points month over month to include 47% of businesses surveyed.
Rent delinquency among minority businesses, meanwhile, hit a new high point for this year in May at 57%, surpassing the 54% mark set in January. Minority respondents to the Alignable survey are struggling with rising interest rates, with 37% saying they are “highly concerned” that higher rates have already hurt their business, compared to 25% across all demographics.
Small-business owners in Illinois had the roughest month in terms of delinquencies, with 52% unable to pay their rents in full and on time in May. The Land of Lincoln was the only state where a majority of small-business owners couldn’t cover their full rents on time, but New York (48%), Minnesota (47%) and Maryland (46%) were close. And rent woes were even worse in Canada, with 53% of small businesses in the nation to the north reporting rent delinquencies.
Why are rent delinquencies on the rise? For one thing, rent spikes are becoming more widespread. Fifty-four percent of small businesses reported paying more now than they did six months ago. That’s a new record high for a figure that has risen steadily as small businesses have reported dealing with higher rent prices each month this year. Fourteen percent of small-business owners say their rent is more than 20% higher than it was in December 2022.
Meanwhile, inflation continues to be a bane for many small businesses. Thirty-nine percent of Alignable survey responses named inflation as their biggest financial problem in May, up 7 points from April. And declining revenue generation has dented small-business coffers on the other end as consumers tighten their spending with a recession still potentially in the cards.
Forty-five percent of small-business owners who launched their companies prior to the COVID-19 pandemic said their May revenues were half or less than half of what they earned each month before the pandemic. Those who started their businesses after the pandemic reported choppier waters, with 51% of these respondents bringing in half or less than half of what they earned last year.