A new analysis determined which states have the most and least expensive rent for small businesses in the U.S.
The research team from custom printing services company StickerYou analyzed the average commercial property rent cost, electricity cost, water cost, internet cost, sewer cost, and trash cost across large U.S. cities to see which states had the most expensive costs for small retailers and restaurants.
The data found that the average price of a commercial rental for small restaurants and retailers in the U.S. was $51.26 per square foot per year.
According to the analysis, the following are the top 10 most expensive states for small businesses to operate:
| Rank | State | Median Restaurant Rental Cost ($ Per SF/YR) | Median Retail Rental Cost ($ Per SF/YR) | Electricity Cost ($) | Water Cost ($) | Internet Cost ($) | Sewer Cost ($) | Business Operation Cost Score /100 |
| 1 | Georgia | 138.09 | 132.84 | 129.92 | 43.00 | 73.65 | 94.00 | 99 |
| 2 | Hawaii | 55.50 | 114.00 | 162.66 | 80.00 | 63.18 | 124.00 | 96 |
| 3 | California | 42.16 | 77.22 | 116.94 | 94.00 | 101.03 | 58.00 | 95 |
| 4 | Texas | 42.33 | 63.36 | 132.59 | 63.00 | 73.27 | 86.00 | 93 |
| 5 | Alabama | 197.00 | 22.13 | 143.95 | 57.00 | 74.10 | 89.00 | 90 |
| 6 | New Jersey | 48.22 | 176.24 | 109.54 | 57.00 | 82.79 | 71.00 | 88 |
| 7 | District of Columbia | 47.50 | 154.61 | 88.89 | 41.00 | 118.19 | 86.00 | 86 |
| 8 | Alaska | 15.70 | 35.40 | 124.66 | 89.00 | 103.73 | 74.00 | 83 |
| 9 | New York | 84.51 | 202.03 | 110.47 | 33.00 | 96.08 | 52.00 | 82 |
| 10 | Massachusetts | 59.60 | 50.25 | 132.18 | 35.00 | 93.60 | 46.00 | 80 |
Key findings of the analysis include:
- Georgia leads in the rankings, being the most expensive state in America: The state’s restaurant rental cost is at $138.09 per square foot and $132.84 per square foot on the retail space, creating major barriers for food service and retail businesses.
- Southern and western states dominate the most expensive markets in the country: Hawaii, California, Texas, and Alabama are among the top five most costly places to operate, with Hawaii having an electricity cost of $162.66 and California paying $101.03 for its internet service.
- Coastal and high-demand states create the biggest financial challenges for businesses: New York, Massachusetts, New Jersey, and Washington D.C. all scored above 80. These markets would have to raise their pricing due to expensive retail space.
- Midwest and Mountain states have the lowest operating costs: States like New Mexico, Michigan, Minnesota, and Wisconsin offer some of the most affordable business environments. New Mexico has the best value with a $26 restaurant rent per square foot, while Kansas benefits from the lowest retail rental costs at $17.32 per square foot, and multiple states maintain competitive utility rates in various categories.
- The most expensive city overall was Los Angeles in California for small business operations nationwide, with retail space costing at $361.25 per square foot and $117.75 per square foot on the restaurant space.
“This data highlights a real challenge for businesses today. There is a massive gap between the high-cost and low-cost markets,” StickerYou CEO Andrew Witkin said in a statement. “What’s interesting is how these cost pressures force businesses to make difficult decisions. In expensive markets like New York or California, every dollar counts, so business owners have to be smart about where they invest. Unlike high-cost markets, lower-cost states have more breathing room to build for the long term.”
The challenge, he said, isn’t just about rent or utilities; it’s about how these cost ripple through everything a business does.
“Businesses that find ways to stand out and connect with customers, regardless of their market, are the ones that are thriving,” Witkin said. “States that have the lowest operating costs have a real advantage, as business owners there have the opportunity to invest in growth and customer experience instead of just covering basic expenses. That’s the competitive advantage that entrepreneurs should take advantage of.”
Methodology: In addition to city rankings, states were evaluated based on six commercial cost categories: average commercial property rent cost, electricity cost, water cost, internet cost, sewer cost, and trash cost. The commercial property rent cost for each state was calculated as the average of all cities from that state that appeared in the top 100 city rankings, while utility cost data (water, internet, sewer, and trash) were obtained from Move.org. Only states with at least one city represented in the top 100 most populous cities were included in the state-level analysis, ensuring that all ranked states had direct representation in the primary city dataset.
Photo credit: PaperFox/iStock
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
