Small retail spaces are leasing well around the country with demand remaining steady from entrepreneurial business owners.

Leasing in the retail sector is “chugging along” says Bayleys’ national director retail, Chris Beasleigh and for smaller spaces, there are more retail units being leased than there are coming up vacant.

Compact-sized shops and premises have always been popular, but as economic conditions tighten and consumers tighten their spending belts, there is an inevitable churn of space – depending on the operator and market segment.

“Historically, and across markets, small businesses have a reasonably high failure rate and we’ve seen a number of quite high-profile operators with multiple small retail sites come unstuck in recent months as the pandemic ‘hangover’ kicks in and they’ve found themselves overcommitted,” says Beasleigh.

“There’s been a build-up of debt and the banks and IRD are now playing tougher so, sadly, I do think we will see more businesses under pressure over the next 12 months.”

However, small business owners taking leases over smaller format stores have lower overheads, need fewer staff and as long as they have some contingency, can explore new business ideas and test locations more readily than bigger operators can.

Beasleigh says while landlords are not discounting rents per se, he has noted more flexibility around lease terms and in some instances, assistance with fitouts for the right tenant.

“The sweet spot is around 80sqm with annual rent of circa-$40,000 – that’s where we’re seeing demand as it’s the perfect footprint and has a rental price point that works for a grab-and-go convenience store, takeaway store, or service retail operator like a nail bar, for example.

“There are always new businesses starting up and I think building owners are pretty fair in the current market as they want their retail spaces filled and it makes for vibrancy both in retail strips and within precincts or mixed-use developments.”

Small retail units within larger shopping precincts are very sought-after says Beasleigh with business owners looking to piggyback off the foot-traffic that anchor and sub-anchor tenants attract and to leverage the provided parking for customers.

“Developers like to have a proportion of smaller shops within developments as these command a higher per square metre rental rate, round out the rent roll and provide complementary retail and service offerings that make for a one-stop-shop experience.

“Small business owners benefit from the due diligence that the big developers and the anchor tenants have done on the viability of location, demographics, and traffic flows so they can be where the action is and know they’ve got the best of chance of visibility and customer numbers if they align their business in these hubs.”

Smaller premises at the street level of mixed-use developments are also proving popular with independent businesses focused on service and convenience retail as they have a ready customer base from the office and residential components of these developments.

“Around New Zealand, Bayleys’ leasing brokers are up with the retail market play and can link business owners up with an optimal site that works for their operating model.”