Dive Brief:
- Signaling a recovery, rent delinquency rates among small businesses dropped from 40% in August to 30% in September, according to the September Rent Report from Alignable shared with Retail Dive. That’s the best rent delinquency rate among small businesses since April.
- The delinquency rate for small retailers mirrored the overall trend, reaching 31% last month, down from 40% in August.
- Overall, 59% of respondents said they are charging more for their goods and services to account for inflationary pressures and cover their expenses, and 29% said they have recovered from the early COVID-19 pandemic lows and are making “as much if not more” than pre-COVID.
Dive Insight:
Are small businesses bouncing back? Alignable noted the shift is “encouraging news” and that if this growth continues into Q4, it could mark a stronger recovery for small businesses.
In 2020 at the start of the COVID-19 pandemic, the retail industry and the landlords that owned retailer storefronts were hit hard by the once-in-a-lifetime pandemic. Through early December 2020, the return of the SNL U.S. REIT Retail Shopping Center Index was down 26.9% that year. Meanwhile, CBL and PREIT both filed for bankruptcy in November 2020 as retailers struggled to make rent.
For small businesses, difficulties paying rent have been long lasting. In April, 34% of small retail businesses couldn’t make rent, six percentage points higher than February, Alignable found. At the time, nearly half (46%) of small businesses surveyed said their rent was higher than it was six months prior.
Almost six in 10 small retailers surveyed by Alignable said they were on the verge of shuttering by the fall, according to an Alignable report released in July. The survey respondents cited inflation, higher interest rates, gas prices, rent hikes, supply chain issues and other reasons why their businesses were near their breaking point.
Meanwhile, landlords with larger retail tenants are trying to resume their pre-pandemic business practices. While landlords are not charging rents at their pre-pandemic levels, they are less willing to give rent relief, agree to percent-sale rent arrangements or allow other pandemic concessions, according to a JLL report released in February.
