Small blessings: hole-in-the-wall trend for cafes

Small hole-in-the-wall coffee venues are rapidly replacing conventional large-format cafes as hip coffee houses take off, commercial agents say.

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.