'Perfect storm' forces local business closures

JD
Updated July 24 2022 - 3:40pm, first published July 5 2022 - 5:00am
Kate Chamberlian ... 'locals really sort of embraced the bakery as their own'. Photo Morgan Hancock
Kate Chamberlian ... 'locals really sort of embraced the bakery as their own'. Photo Morgan Hancock

After surviving the COVID-19 lockdowns, Richmond's retail sector is facing serious challenges which have seen a number of long-running local businesses close their doors in recent weeks.

The popular Swan St Bakery and Patisserie closed down on Friday after nine years, as did the Fish Market Burger Bar and Grill in Bridge Rd, which has been feeding locals for just under a decade.

Other recent losses include Bridge Rd businesses Palm Sugar Thai Cuisine and Uitgang Bar, which both shut in June and Swan St's Pyramid Scheme cafe about eight weeks earlier.

While a perfect storm of cost increases, reduced custom and staff shortages has descended on hospitality and food businesses already struggling to recover from the last few years, the situation is a complicated one that has affected some businesses more than others.

According to the national Restaurant & Catering Industry Association, businesses are currently facing two key pressures - workforce shortages and the cost of doing business.

"The hospitality industry has been hit significantly, with businesses now dealing with a hangover of debt after missing out on $10 billion of reservations over the last two years," association chief executive Belinda Clarke told the Inner East Review.

"On top of higher electricity and rent costs, restaurant operators are also navigating staffing shortages, higher wages, rising food costs, increased freight and supply chain issues.

"We always see a natural turnover of around 20 per cent in the industry; however, with the recent increases we expect to see more venues forced to close their doors."

Yarra City Council said COVID lockdowns had had a significant impact on local businesses and confirmed there was a higher-than-average rate of vacancies across each of the area's 12 retail precincts.

As a consequence, the council had instigated a new jobs platform to support local businesses and help them find staff.

Swan St Bakery and Patisserie owner Kate Chamberlain, who opened her shop in 2013, has been overwhelmed by the flood of messages from customers sorry to hear it was closing.

The bakery, known for its sausage rolls, pies, lemon tarts and brownies, was embraced by locals from the start, Chamberlain says.

"We had a very warm welcome from the Richmond locals straight off the bat.

"We got to know a lot of them on a personal level. You'd see the kids in the push chairs and then you'd be making their first, second, third and fourth birthday cakes, so we developed a really strong support network through the locals and also the primary school and the Richmond creche."

For Chamberlain, it was news of a planned rent increase that tipped her over the edge.

"We had a nine-year lease which was up, and the new lease that was offered was more than we were already paying," she said.

"Given everything that's going on with the cost of goods and obviously being impacted by COVID for a couple of years, it just was too much really to try and pay that as well.

"After telling the real estate agents she was willing to negotiate but not to pay the full proposed increase she heard nothing back.

Palm Sugar owner Lynn Anastasiou, who closed her restaurant early in June after eight years on Bridge Rd, said that after reducing the rent significantly for two years her landlord had raised it in June to close to its pre-pandemic levels.

On top of that, the price of vegetables and meat had doubled.

"We had put our prices up twice already," she said, and we felt it might be too much if we put the price up again.

"The second time we put it up, the customers complained and we lost a lot of them as well."

Palm Sugar was also affected by the shortage of staff.

"There are a lot of memories," Anastasiou says. "Lots of people we knew, from when they were dating until their kids are in primary school."

While Fish Market Burger Bar and Grill owner Chris Patinyot had no complaints about his landlords, who were "accommodating" during the lockdown period, and "have their own mortgages to pay", he says that given the other difficulties he faces, he would need the rent to be significantly lower for his business to work.

"It's just unsustainable now - not just this shop but the whole strip."

A lack of foot traffic and dine-in custom and the public mood of cautious restraint means he has been unable to capitalise on his investment in the restaurant and was only kept afloat by locals ordering takeaway, Patinyot says, with the increasing cost of supplies and staff shortages also hitting hard.

Like Chamberlain and Anastasiou, the fish shop owner was saddened by making the "last-minute" decision to close.

"Unfortunately I had a chat with the accountant, who said there was no point going into the next financial year," he says.

Another food business impacted by the downturn is high-end Swan St meat merchants Bertie's Butcher.

Owner Jason Gabriel said he was planning to seek a reduction in rent.

"Foot traffic's down, takings are down, people's behaviour has changed since January when things opened up again," he said.

"I think a lot of people have moved away."

According to Yarra City Councillor Herschel Landes, a former president of the Bridge Rd Traders Association, parking machine data shows that traffic hasn't returned to pre-COVID levels.

Landes has been told by government officials that while night time and weekend shopping and traffic has recovered, office activity and the business hours economy is not expected to do so.

"There's a real challenge now for people in the high streets doing business and it's very daunting," he says.

"My message to landlords is don't be in a hurry to put your rents up because you'll end up with an empty shop and they won't be very easy to fill."

At the same time he warned against generalising about the situation for small businesses.

"You can't generalise because there's always going to be some businesses that will succeed and others that don't.

"And it depends on where they are in their business cycle.

"Typically they will come into a centre at very low rents but by the third time they sign a lease those rents will often be much higher."

Landes said he believed the key issue was how various local economies adapted to changing conditions.

Bridge Rd Traders Association vice president Martin Shaw also sees Richmond's shopping strips as evolving micro-climates.

"Streets like these are organic living things that change over decades," he said.

While strong demand in Swan St meant rents there would stay high, the situation was different on Bridge Rd, where they have been low for a while and where Shaw believes "a metamorphosis is occurring".

"Swan St is probably facing the same pressures Bridge Rd was 10 years ago," he says.

"But I think the [Bridge Rd] renaissance is already starting, with the new [Richmond Traders] Coles and [boutique hotel], Peppers due to open.

While he described it as "absolutely tragic" that some people were doing it tough, Shaw pointed to new bagel and banh mi shops that have people queueing out the door every day.

"That's the harsh reality of life," he said.

With his Bridge Rd Local Locksmiths shop, Shaw is an example of owner-occupiers now being able to afford to base their businesses on that strip.

Teska and Carson real estate executive Reece Israel described the overall commercial rental picture in the high streets of Richmond, South Yarra and Armadale, where he works, as "mixed".

"Over the last year it's been pretty slow," he said.

"Obviously there's been a lot of business closures but at the same time there's been people taking advantage of what's available [in terms of low rents]."

Israel said rents were "really based on the property and location" and that most landlords were prepared to negotiate "for a good tenant".

"Bridge Rd is a lot fuller than it was a couple of years ago," he said.

JD

Jenny Denton

Journalist

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