Cost of renting hurting small businesses

finance stressSmall Australian businesses are being crippled by high rental costs, leaving many to regret their choice of premises, new research shows.

A Canstar Blue survey has found the average monthly rent of small businesses to be $2,500.

Almost three-quarters (71%) of owners admitted that rental costs are a major concern to their business. And with an average lease length of just over four years, 35% of respondents are concerned that they agreed too long a tenancy.

“The cost of renting commercial space is hitting a lot of small businesses hard, but most will have no choice,” said Head of Canstar Blue, Megan Doyle. “Rental costs and lease length will be particularly concerning to the owners of small start-ups who could be left with a long-term commitment if their business fails.

“What’s most concerning is that more than one in three small business owners feel locked into tenancy agreements that are costing them big. If they suffer a financial setback, their rent could be the cost that cripples them.”

The survey, of almost 700 small business owners with fewer than 20 employees, also found that 38% are stuck in premises that are not as good as they first thought.

Despite the concern of small businesses, demand for office space is increasing, according to the Property Council of Australia. It reports that office vacancy decreased over the six months to July 2015, from 10.8% to 10.4%. However, the national average has been driven by the surge in demand for office space in Sydney and Melbourne CBDs, while other cities recorded an increase in their vacancy rate or weak demand.

“The strong demand in those cities may be a good sign for the economy, but Sydney and Melbourne CBDs are a long way from the reality that many small businesses face as they struggle with the cost of their commercial space,” said Mrs Doyle. “More than half of owners (55%) are worried about the future of their business.”

Which real estate agent is rated highest?

Small business owners who took part in the survey were asked to rate the real estate agent they most recently used, forming Canstar Blue’s customer satisfaction ratings. The ratings include responses from those who used an agent for buying, selling, letting or renting, with Century 21 found to be the highest rated of six companies.

The majority of business owners (78%) said they enjoy a good relationship with their real estate agent, while 64% said they are quick to handle requests or complaints and 67% would recommend them.

“Amid concern about the cost of renting, it’s important to get the best advice and service possible,” said Mrs Doyle. “If you’re locking in a lengthy tenancy agreement, it’s crucial that all parties feel they’re getting a good deal, and it’s the agent’s job to facilitate that.”

“Century 21 has invested significant resources across its network to ensure that clients have a positive experience with the brand and its franchises,” said Century 21 Australasia Chairman and Owner Charles Tarbey. “To this end, we have developed unique systems and software that help our agents deliver superior real estate service. This is coupled with personal service and localised real estate knowledge.

“It’s great to see that century 21 has been recognised as the industry leader for helping small businesses with their real estate needs. Our franchisees across Australia always work to put the consumer first, and this award really goes to them.”

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