In high-demand areas like Auckland’s Queen St and Wellington’s CBD, landlords are commanding over $3000 per square metre in rent.
But instead of being edged out of the area, food and beverage start-ups who can’t afford the prices are minimising the space they need.
Businesses like bakers, juice bars and coffee bars are now taking over small rental spaces that were formerly used as toilet blocks and currency exchanges.
The intimate spaces are often a hit with customers due to how unique they are, showing bigger is not always better.
National commercial director for Bayleys Real Estate John Church says the trend is a relatively new phenomenon for New Zealand.
“Historically, space has never been a problem in New Zealand retail,” he says.
“The small, kiosk-style outlets and narrow stores that have been a feature of the main streets of cities across Europe grew out of a need to fit into urban environments that had their roots in the medieval period.”
Church says New Zealand retailers have always had the luxury of space on prime shopping strips, so they previously never had a need to go micro.
“However, the growth in ecommerce and mall shopping, the arrival of international and premium brands, combined with a marked change in consumer habits, have transformed main streets quite considerably over recent years,” he says.
Though the spaces may be small, the petite size can work in favour for retailers, too.
Bayleys research has found micro-retail shops can attract shoppers back to tired shopping strips by offering a new, unique experience.
Also, Bayleys says the face-to-face intimacy of the stores is refreshing for shoppers who want a bit of social interaction now that online shopping is so huge.
Co-founders of organic gelato company Lalele Organic Nathan Gutsell and Mulan Zhang say the size of their store has allowed them to bond more with customers.
They were keen to set up shop in Auckland’s CBD, but Queen St’s rental prices proved to be a hindrance.
Gutsell and Zhang decided to get creative and open a hole-in-the-wall store instead. The shop space they now occupy has internet, power and water, but proudly declares itself as ‘The world’s smallest gelato store’ seeing as it’s only four square metres in size.
“The shop frontage is very small which means it can be easy to miss and we can’t display all our products, but the benefit is the fit-out was economical and the ongoing costs are affordable. It’s also a great talking point with our customers,” Gutsell says.
He says the rent for Lalele Organic’s store is $2500 a month, plus GST and minimal operating experiences.
In Raglan, Ruapuke Artisan Bread sells its goods from a 2.8 square metre cubbyhole in the city centre.
Baker Jenny Carter says she didn’t expect the shop to attract as much attention as it does, with the store getting photographed most days.
“It's an interesting concept to maximise 'small'. I sometimes tell customers that I'm going to be a supermarket when I grow up,” Carter says.
Meanwhile, in Wellington, Gentlemen’s Beans is a 13-square-metre site nestled within the CBD that used to be a men’s public toilet.
While small, the coffee bar is in prime position to catch the city’s workers on the way to start their day.
Owner Belinda Beckett says there’s no issues that arise out of operating out of a little shop space.
“The small space in itself hasn’t been an issue,” Beckett says. “Every part of the shop is used to its fullest and we have under floor storage for excess stock.”
Overseas, big players like Sainsbury’s in the UK are testing out micro-stores of around 300 square metres in size in more than 1000 locations.
The stores target busy shoppers and only stock around 1000 food products.