The trend toward higher rent prices for independent restaurant operators accelerated in June, with 63% noting their rent is higher now than it was just six months ago. According to Alignable’s June Small Business Rent Report, this is compared to 55% of all small business owners navigating higher rent prices, an 8% jump from January and a record high.
Further, 16% of all small business owners say their rent is over 20% higher, marking a 2% increase since May. For context, 47% of small business owners noted they were experiencing higher rent prices in January, and that number has grown each month.
This rent inflation is driving delinquencies, with 39% of small business owners acknowledging they were unable to pay the rent in June – a 2% increase from May and 9% increase from January. For the restaurant sector specifically, 45% of operators were unable to pay rent in June. This is compared to 44% in May and 49% in April.
June’s rent delinquencies remain much higher than the beginning of the year, with delinquencies at 40% in February and 38% in January, illustrating that the macroeconomic environment remains very much a challenge for mom-and-pop establishments.
In addition to rising rent prices, most small business owners – 53% - said they’re earning half or less of the revenues they generated this time last year. This is compared to 51% in May.
In addition to inflation and slowing cash flow, most small business owners also cited rising interest rates as a hindrance to growth.
Minority-owned businesses fared even worse in June, with 58% noting they couldn’t pay June rent – a 2023 high. Minorities polled noted they’re having a harder time with increasing interest rates, cash reserves and rent spikes. Nearly one-fourth of minority business owners are highly concerned about increasing interest rates, versus 19% across all demographics. And, 40% of minorities say they have one month or less of cash reserves now, compared to an average of 30% across all groups.
States reporting the highest delinquency rates in June include New Jersey, Florida, Georgia, Ohio and Illinois, while Washington, Colorado and Michigan had the lowest rates.
If there is a silver lining with this month’s report, it’s that the Federal Reserve paused interest rate hikes in June and small business optimism levels have improved by over three points in Q2 versus Q1, according to the MetLife and U.S. Chamber of Commerce Small Business Index.
Contact Alicia Kelso at [email protected]