This entry of the Huntsville Business Journal’s Real Estate Update takes a step back from the residential real estate market in order to take a look at developments in commercial real estate.

The August 2022 report from Alignable, the nationwide small business online network company, shows a record-breaking 40% of small businesses nationally being unable to pay their rent.

Rent delinquency – failing to pay the rent on time and in full – has been an issue since the pandemic, but the sharp rise in 2022 has derailed efforts to fully recover from the pandemic. August’s 40% national average, a 6% increase from June, sets a high-water mark that hasn’t been seen since March 2021.

These woes are exacerbated for small businesses owned by minorities and women. 42% of small businesses owned by women and 53% of minority owned small businesses experienced rent delinquency.

Veteran-owned businesses have also faced a massive leap in rental delinquency, reporting a rate of 40% – up a full 12 points from July.

There are a number of factors that have caused this spike in rent delinquency. Prices for all commodities, most especially fuel, rose sharply with inflation, driving up operating costs. Interest rates have been rising, and consumer spending, similarly affected by these factors, has declined. Customers have less to spend, and are more hesitant to spend what they do have.

The situation in Alabama is more severe than the national average, with 46% of small businesses that rent in the state reporting rental delinquency. That’s a shocking 28-percentage point leap since Alignable’s May report. The only mitigating factor keeping the state’s situation from matching the states with the highest rental delinquency rates in the country is the lower cost of living here in Alabama.