Special Report

Small Education Businesses Are Struggling the Most to Pay Rent

Douglas A. McIntyre

Published: January 17, 2023 9:52 am

Paying rent is part of doing business in most industries. Though some companies had hoped that the work-from-home model would eliminate rent, more and more companies have been calling employees back to offices. Across all small businesses, the sector that has been finding paying ongoing rent most challenging is schools.

The problem with rent payments is not confined to educational institutions. A recent study from Alignable, a small business referral network, showed that 37% of small businesses could not pay their rent in October of last year, a jump from 30% the previous month. In the education industry, the figure was 57% in October, up from only 23% in January 2022. (Here is where to find the cheapest rent in every state.)

Why is the education sector in so much trouble with rent payments? The reasons are fundamentally similar across all sectors of the economy. Inflation has raised overhead costs and cut into profits. The rise in fuel costs has been particularly challenging. Further, as the labor market has tightened, hiring people has become more expensive, and for many companies, rent costs are still rising. (Here are states where inflation is causing the most stress.)

Adding to the problem is the fact that part of the U.S. economy has shifted fundamentally, and perhaps permanently. During the height of the pandemic there was a large expansion of the at-home economy — people cooked, cut their hair, and worked out at home. As inflation soared, many people have returned to these cheaper at-home alternatives, hurting businesses again.

Small education businesses may be impacted the same way, as online learning has become more prevalent and some of these options may be cheaper than attending a school location.

See 24/7 Wall St.’s list of the industries with the most struggling small business owners.