Across the United States, small businesses are grappling with rising rent costs, a trend that mirrors the escalating housing market but often garners less attention. A recent study by the Bank of America Institute highlights the disproportionate impact of these increases on businesses in the West, where the average rent payments in May soared to more than double the national average.
The financial strain is evident as approximately 43% of small business owners were unable to pay their full rent on time in April. This rate of delayed payments hasn’t been seen since the peak of the Covid-19 pandemic in March 2021. The study attributes the escalating rents primarily to ongoing inflation pressures.
In Denver, the challenges are palpable among local businesses. “The cost of rent has been very high and very unpredictable,” said Tim Baca, owner of Denver Crystal and Gems. Despite having managed his shop for three years, Baca notes unprecedented increases in rental costs, stating, “I have been looking for a new location. It’s been very difficult. Rents are very high right now.”
To cope with rising operational costs, Baca has adjusted the pricing of his merchandise. However, this strategy has its limits. “I have been looking also in other states because there’s a lot of people moving out of Colorado, out of Denver, a lot of businesses, because the price is too high to run business,” he added.
This trend of relocation or closure is not isolated to Denver. Small businesses in cities like Las Vegas, San Diego, and Washington D.C. are also among those making substantial rent payments, reflecting a broader national issue.
Echoing similar concerns, Matt Megyesy, co-owner of Mutiny Information Café in Denver, expressed his anxiety over the continuous rent hikes. The café, known for its eclectic mix of comic books, coffee, and other items, faces the same financial pressures that have led many small businesses to reassess their futures.
With up to 20 cities nationwide experiencing rent increases over the past year, the economic landscape for small businesses continues to evolve. Many are forced to navigate these challenges with resilience, hoping for a stabilization in rental markets to sustain their operations.
***
We are still feeling the after-effects of massive government stimulus. Contrary to the ‘sometimes-belief’ that state money should drive down prices, it actually often has the reverse outcome. Tight supply doesn’t help either… – Kenneth
