Thanks to soaring inflation, labor shortages and rent hikes, rent delinquency among SMBs are rising for the first time in three months, according to a report from small business online network Alignable. Delinquencies had soared during the peak pandemic period and had recovered somewhat — until now.
The research follows other reports of skyrocketing rents for consumers across the U.S., according to Realtor.com.
Chuck Casto, head of research at Alignable, said in the report minority-owned small businesses have been hardest hit. Casto said 46 percent of minority-owned businesses “couldn’t afford February rent, up 2 percent from January and up 3 percent from December. But increases in rent delinquency were seen among many other groups, industries, and states, as well.”
Alignable noted that, overall, 28 percent of SMBs couldn’t pay rent in February, which is up 2 percent from January. By state, there was a whopping 36 percent of small businesses that couldn’t pay rent in February while Michigan came in with 33 percent. “Those states lead this month’s rates of rent delinquency among SMBs,” Casto said adding that Georgia and California weren’t far behind.
“It’s even worse among several industries, including animal hospitals (45 percent), beauty salons (43 percent), alternative/holistic healers (39 percent) and travel agents/hotels (34 percent),” he added.
“This overall rent trend reflects other data showing that only 29 percent of SMBs have recovered — earning the same or more monthly revenues as they generated prior to COVID-19,” Casto stated. “And that’s down 14 percent from December. But the good news is that 11 percent fewer restaurants had rent problems in February compared to last month. Others seeing improvement were retailers and manufacturers.”
Regarding the Realtor.com research, December marked the sixth consecutive month “where rent growth has reached double digits for zero- to two-bedroom properties (19.3 percent year-over-year), pushing the median rent in the 50 largest metros to $1,781.”
However, the report noted that median rent growth for two-bedroom apartments dropped — for the first time in more than a year while rent growth for a one-bedroom remained the same. Studio apartments continued to grow, jumping 18.6 percent year-over-year in December.
For the year-end period, Realtor.com said the average year-over-year growth “in median asking rents for zero- to two-bedroom properties was 10.1 percent, higher than our 2022 forecasted growth (7.1 percent).”
“The most significant year-over-year rent growth was seen among two-bedroom units, with an average rate of 11.7 percent,” the report stated.
It’s unclear how long rising rents will continue. And retail analysts and economists don’t expect inflation to be tamed anytime soon. Tax checks to consumers may help, though.