Forty percent of U.S. small-business owners couldn’t afford to pay their full rent on time in December, according to a new report from Alignable.
That’s down slightly from the 41% share in November, which was the highest of 2022. December was the third month of the year (following August and November) in which the share of small businesses that couldn’t pay rent met or exceeded 40%.
Even more disturbing, according to Alignable, is that the high percentage of businesses struggling to meet rental costs occurred in December. In 2021, even with the surge of the COVID-19 omicron variant, only 26% of small businesses were unable to pay their rent in full — the lowest delinquency rate of the year.
“But now, 12 months later, the rent delinquency rate has escalated 14 percentage points to 40%, reflecting intensifying economic struggle and a backslide in small-business recoveries that, unfortunately, has been a hallmark of 2022,” Chuck Casto wrote on Alignable’s blog.
“While the overall inflation rate has improved to some extent, the majority of small-business owners (52%) still say it’s a significant concern and impediment to their growth.”
Indeed, in December 2021, 43% of small-business owners indicated in an Alignable poll that they had undergone “a full financial recovery,” bringing in as much or more in monthly profit than they did prior to the COVID-19 crisis. But in December 2022, that percentage had dwindled to 21% or, per Alignable, “less than half of the percentage of small-business owners who thought they were out of the economic woods [in December 2021].”
These numbers may be particularly poignant for those in retail real estate, as the retail sector saw some of the largest shares of tenants unable to pay rent in full in December among all business types. Restaurants had the largest share of struggles, with 52% of survey respondents reporting they were unable to pay December rent in full. Education was next at 49%, followed by general retail at 46% and beauty salons at 44%.
December saw the highest rates of rent delinquency for both restaurants and general retailers. In the case of the former, December’s 52% delinquency rate was a full 10 percentage points higher than the next highest month of the year. And it was up 17 percentage points over the restaurant rent-delinquency rate of 35% in December 2021.