Small blessings: hole-in-the-wall trend for cafes
The quest to be different and offer customers a boutique experience has driven radical changes in store sizes and locations, said Michael Vranic, leasing manager for City Commercial in Sydney.
"The standard coffee shop doesn't exist any more," Mr Vranic said. "Everyone's looking for baristas with the biggest tattoos, biggest beard and best cut-off T-shirt."
The change was most evident in fitouts and size, with many operators favouring buildings with history or character.
"It's gone from a typical coffee shop with table and chairs to a little hole in the wall, 20 to 30 square metres in size with exposed brickwork and a couple of milk crates for stools out front," Mr Vranic said.
Rents, too, were being pared back. In Sydney's central business district, leases for coffee shops in alleyways and locations with limited foot traffic were at the lower end of the $1500 to $1800 per square metre scale, Mr Vranic said.
Melbourne's ubiquitous coffee culture has been rapidly mirrored in Sydney. In downtown Melbourne, operators were very focused on the quality of coffee, said Mitchell Humphreys from Fitzroys agency.
"People will leave their building and walk a block up a lane to get the right coffee," he said.
Operators were "very astute when it comes to quality and origins and blends". Small coffee houses could sustain maximum rents of $1500/sq m rent and would need to turn over 35 to 40 kilograms of coffee a week to be viable.
Like their Sydney counterparts, they were moving away from traditional high foot traffic locations to secondary spaces in laneways and side streets to be more profitable.
To do so, they were "backing themselves on word-of-mouth for the quality of their coffee", he said.
The trend towards smaller venues in Sydney was uniform, particularly in the CBD and inner suburbs from Surry Hills and Darlinghurst to Petersham, Camperdown and Marrickville in the inner west.
Larger brand coffee labels were losing out to smaller single-origin roasters.
"They're driving the change to boutique cafes by giving them what they need to get the customers coming back," Mr Vranic said.
Communal tables for customers and a collaborative approach to sharing space with other businesses - barbers or gourmet grocers, for example - were also popular, he said.
In Melbourne, operators in the suburbs were being forced by rents and returns to stay very small or scale up to 100-seat venues.
Tracing the beans
Brazil and Vietnam are the biggest coffee producers, while the US and Europe are the largest consumers.
Coffee is traded on the New York Board of Trade (NYBOT), Euronext and on the Brazilian Mercantile and Futures Exchange.
The NYBOT "C" contract specifies the delivery of 37,500 pounds of arabica coffee. The equivalent robusta contract has the same specifications.
Frequently Asked Questions about this Article…
The article describes a shift from large-format cafes to small 'hole-in-the-wall' coffee venues (often 20–30 square metres) that offer a boutique, character-led experience. Operators are choosing historic or quirky fitouts, focusing on high-quality coffee and word-of-mouth appeal, which can be more profitable than traditional high-footfall locations.
Many of the new venues are compact—around 20 to 30 square metres—and feature exposed brickwork, minimal seating like milk crates or stools, communal tables, and simple, characterful interiors designed to create a boutique coffee experience.
Leases for coffee shops in alleyways or locations with limited foot traffic in Sydney’s CBD are at the lower end of a $1,500 to $1,800 per square metre scale, according to the article. It also notes that small coffee houses could sustain maximum rents of about $1,500 per square metre.
The article cites that to be viable at those rent levels, a small coffee house would need to turn over roughly 35 to 40 kilograms of coffee per week.
Consumers are increasingly seeking quality, origins and specialty blends, which is helping single-origin roasters and smaller labels gain ground over larger coffee brands. Operators are focusing on coffee quality to draw customers even if they are in secondary laneway locations.
Cafes are experimenting with communal seating and sharing space with complementary businesses—like barbers or gourmet grocers—to reduce costs and drive traffic. In suburbs, some operators are either staying very small due to rent pressure or scaling up to larger 100-seat venues where feasible.
The piece notes Brazil and Vietnam are the biggest coffee producers, while the US and Europe are the largest consumers. Coffee is traded on exchanges such as the New York Board of Trade (NYBOT), Euronext and the Brazilian Mercantile and Futures Exchange, which investors can monitor for price signals.
The article mentions the NYBOT 'C' contract, which specifies delivery of 37,500 pounds of arabica coffee, and that the equivalent robusta contract has the same specifications—useful facts for investors tracking physical coffee futures contracts.
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