After 2 years of lockdowns, the city of Melbourne is finally starting to come back to life but the global pandemic has permanently disrupted some industries, especially the commercial leasing industry.

Vacancy rates for commercial properties - shops, offices and warehouses - in Melbourne have increased to over 10% hitting 20 year highs. With more shop vacancies you would believe less people are starting new businesses. When in reality, the number of small businesses in Australia has grown by 88,000 in the last year.

With more people launching small businesses than ever, there should be more people than ever looking for commercial leases. So why are we seeing so many vacant shops?

The global pandemic has permanently changed the way we do business. Here are 9 reasons why business owners aren’t leasing shops anymore.

Long leases

When opening a new shop, a retail renter wants new tenants to sign up for long 3, 5 or even 10 year leases to ensure themselves a stable stream of income. As a new business owner, it's hard to predict how successful their shop is going to be.

Locked in

Just like a lease agreement for a house, commercial leases are legally binding contracts. Meaning if you try to break the lease early, miss rental payments or refuse to follow the tenancy agreements, the renter can take legal action against the tenant. Tying up business owners with court dates and expensive legal fees on top of the daily stressors running their business.

Leasing a retail space is a huge commitment. Long term store leasing is enough to make some business owners reassess their business model and opt out of traditional leasing.

Expensive set-up costs

When you set up a shop, you need to pay a bond which can cost thousands, then start spending money to design, renovate and decorate and design. Business owners need to invest thousands of dollars of setting up their retail space, which can eat into profits.

Large rent increases

As a tenant, when you sign a legally binding rental agreement, you are subject to rental increases. In some instances, the rent increases according to inflation but there are stories of steep rent increases in some shopping centres of over 20%. It's enough to make some tenants not renew their leases, review their business model or break the lease altogether.

Strict rental applications

In order to open a shop, tenants need to write a rental application. When businesses, first start out they may write up multiple rental applications, hoping to get accepted. Commercial rental applications can be very time-consuming to fill out.

The online world

In the 21st century, businesses can run 100% online. The internet is partially responsible for the boom in new businesses. Running online businesses can reduce running costs and eliminates the need for traditional leasing.

The only catch with 100% online businesses is there are limited ways to test the market and viability of a permanent space to do business.

Staffing

In order to run a physical shop, you need to ensure there is someone present to run it. The great resignation has created retail staffing shortages across Australia, making it harder for business owners to fill these gaps. Staffing is generally one of costs when running an business.

Opening times

In order to run a retail space, you need to be open! Local laws or body corporates can dictate what times tenants are expected to be open for, whether there are customers walking through the doors or not.

Add on costs.

When businesses lease a shop, they are responsible for all the additional costs including insurance, bills, stock, subscriptions body corporate and more.

The rise of the pop up shop

Businesses are frustrated with the traditional leasing model. They want more flexible ways to expand their business in a retail setting.

With the rise of the Millennial, comes the rise of the pop up shop. A pop up shop is a business with a short term lease in a prime location to promote their brand to the public.

With Hawker spaces, you don't have to worry about any of these restricting reasons stopping you from opening a shop.

Hawker spaces has reinvented the pop up shop with a flexible short term lease in premier locations. With Hawker, you gain access to unique digital technology and help you easily set up your store.

By booking a Hawker space you can set up a pop up shop, test the market, use it as an event space and do so much more.

Find out what you and your business can achieve and book a Hawker Space today.