40% Of SMBs Can’t Pay Sept. Rent – A New High For 2023

RENT REPORT | DATA INSIGHTS | BOSTON, MA -- September 29, 2023: Forty percent of U.S. small business owners were unable to pay their September rent in full and on time, according to Alignable’s September Rent Report released today. That is a record high for 2023, after months of bouncing between rates of 37% and 39%. 

Up a percentage point from August, the 40% figure is 10 percentage points higher than the rent delinquency rate in January, when it was only 30%.

Many unfortunate economic circumstances are colliding for small businesses right now leading to this high rent delinquency rate, according to 4,523 randomly selected entrepreneurs who responded to Alignable’s survey from 9/2/23 to 9/28/23. 

Alignable's September Rent Report also includes input from another 40,000+ small business owners over the past nine months.

So Why Is Rent Delinquency Now At 40%?

Here’s the current list of issues contributing to 2023’s new record high for SMB rent delinquency:

• Revenue Loss: 53% are making half or less of the income they generated monthly prior to COVID (up 3% from August). For businesses that are only one to three years old, this situation is even more dire: 60% of this group reports making less than half of what they made this time last year. (That’s up seven percentage points from August, when it was 53%).
• High Interest Rates: 50% of SMB owners polled said 18 months of climbing interest rates have cut into their margins, reduced revenues, and have stunted their plans to grow or take out loans. And 38% of this group notes that the U.S. Federal Reserve will need to lower the rate by at least three points before these SMB owners can start to recover.
• Increased Rent Prices: 52% say they’re being charged more for rent now than they were six months ago, with 14% saying it’s 20% higher or more.
  
• Inflated Gas Prices: 46% say higher-than-usual gas prices over the past few months have slowed down their business growth.

This chart shows how the percentage of SMBs reporting economic loss continues to climb from July to the present, up 13 percentage points in just two months for older businesses founded prior to COVID.

At present, only 34% of those businesses have recovered financially from the pandemic era, leaving 66% still striving to make up for time they lost due to COVID, inflationary pressures, and now historically high interest rates.

Retailers Top The List Of Those Struggling Now 

The big story here is that 47% of retailers taking this latest poll told us they couldn’t afford to pay their rent in full. So, nearly half of the retailers taking September's poll couldn't cover their rent. 

Let's look at the charts below to see what's happening here. 

This is alarming for a few reasons, including that it marks a record high for not only 2023’s retail rent delinquency rate, but for what retailers have been telling us for more than the past year. 

It’s also up eight percentage points from August. 

In fact, as you can see above, almost all industries we watch most closely had an increase in rent delinquency rates in September. 

Ironically, only the automotive industry saw a slight decline in delinquency, which indicates that the UAW strike has not yet affected the small businesses in this industry. If that strike continues and intensifies, we will be watching this category very closely for any revenue or rent delinquency shifts.

Here’s the rundown on other sectors, however, that are struggling more now vs. last month to cover their rent:

• 45% of those in travel/lodging (up 13 percentage points from August)
• 43% in education (up 18 percentage points)
• 42% of gym owners (up four percentage points)
• 41% in construction (up one percentage point)
• 39% in transportation (up seven percentage points, largely due to higher gas prices)
• 38% of beauty salons and barber shops (up eight percentage points)
• 36% of musicians/artists (up eight percentage points), and
• 25% of manufacturers (up three percentage points). 

The percentage of real estate agents that couldn’t pay rent was 35% in September, holding steady from August.

When looking at rent delinquency from the vantage point of the states and provinces that are most affected, many surges can be seen between August and September, while a few states saw some hopeful (and dramatic) declines.

NY, NJ & IL Top The List Of States With Rent Troubles

Let’s start with the good news we can cull looking at the states. Though Illinois is in the Top 3 in terms of rent delinquency rates among small businesses, the rate is now 46%, six percentage points better than it was in August at 52%.

Here are the other states that shared delinquency rate declines:

• MA (at just 16%, down 18 percentage points from August. This is remarkable and we hope it lasts. It's also the best news in this report). 
• VA (19%, down 13 percentage points)
• AZ (36%, down 11 percentage points)
• CO (37%, down 10 percentage points)
• TX (38%, down nine percentage points), and
• PA (41%, down one percentage point).

While those states have some more promising numbers, many others saw major spikes in delinquency rates which are worrisome, to say the least. 

Here’s what September’s survey uncovered in that regard: the majority of small business owners in New York and New Jersey could not pay their rent in full and on time in September.

Right now, 55% of New York’s small businesses can’t afford the rent, up 12 percentage points from August. 

In New Jersey, the figure is 54%, up 15 percentage points from last month. 

As noted above, Illinois-based businesses are in third place on this list at 46%, which remains a big number and higher than the already record-breaking national average: 40%.

Here's what the situation looks like for other states with small business owners who are having a tough time coming up with the rent. These are listed by the percentage increase between August and September for each state:

• GA (38%), up 27 percentage points from August
• MI (45%), up 23 percentage points
• WA (23%), up 10 percentage points
• FL (36%), up six percentage points 
• CT (29%), up six percentage points
• OH (32%), up five percentage points
• MD (45%), up three percentage points
• CA (35%), up two percentage points
• NC (27%), up one percentage point

Meanwhile, MN remains with a rent delinquency rate of 45% for the second month in a row. 

So What's Happening In Canada? Much Of The Same

Based on our survey, like their peers to the south, 40% of Canadian small business owners also could not afford to pay their rent in full and on time in September. 

And like the U.S., that figure is one percentage point higher than it was last month, at 39%. 

Looking at the three provinces with the highest number of poll participants, we found that:

• Alberta led the group with 44% of its small business owners unable to pay their rent, up 10 percentage points from August, when the delinquency rate was only 34%. 
• Ontario was a close second at 41%, up seven percentage points from 34% last month. 
• But the situation's looking much more positive in British Columbia, where only 28% said they couldn't cover September rent, down four percentage points from 32% last month.
  

To see more detailed findings from Alignable's September Rent Report covering other industries, states, provinces, or demographic groups, please contact me at chuck@alignable.com.

To review past poll results, go here or to the Alignable Research Center.

About The Alignable Research Center

Alignable is the largest online referral network for small businesses with 8 million+ members across North America.

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.