Waterloo region businesses close due to 'heartless' rent increases, lack of market regulations

After 25 years as a Hespeler staple for fresh sub sandwiches and ice cream, Papou's Place closed its doors in mid-February.

Just down the street — and within the same week — the Village Eatery, which offered a variety of homemade dishes for more than six years, also locked up for good.

Both Cambridge, Ont., restaurant owners say they couldn't afford increasing rent costs anymore.

"If we can't afford to pay the bills, why would we stay here?" said Chris Bogias, owner of Papou's.

'It was a heartless increase'

Bogias, who continues to operate his Galt location, said rent had steadily increased over the last few years, but when he went to renew his lease this year, he was shocked to learn his Hespeler landlord bumped up the rent by 30 per cent.

"I decided this year I won't take it," he said. "I don't want to pay too much. I have to make a living, too."

Steve Galloway, who owned the Village Eatery, said his landlord requested a 35 per cent increase in 2022 and advised of another 35 per cent hike in 2023.

"I just feel like it was a heartless increase, it's just greed. That's the only explanation I can come up with," he said, noting the need for better protections for small businesses.

"Commercial real estate is fairly unregulated, and [the government] needs to have some kind of regulation," he said.

Galloway said his decision to shut down was also influenced by COVID-related challenges including government-mandated closures, food supply shortages and inflation.

"It's very difficult," he said.

Last week, Aroma Café in Waterloo announced it was also closing its doors partially due to pandemic-related and financial challenges.

"Surviving and adapting to a [three-year] pandemic, the sale of the building housing our business, and to be thrown 18-months to relocate in a city where rental costs have skyrocketed was definitely not something we predicted," the business said in a social media post.

More protections needed

Many businesses across Ontario have suffered the same fate.

Better Way Alliance, an organization made up of small and medium businesses in Ontario, said there is little to no provincial government oversight of the commercial real estate industry.

"So many people who aren't small business owners are shocked to learn that there are no guidelines for increases, and a landlord can hike the rent by any amount," said Gilleen Pearce, an Ontario business owner and co-ordinator for the organization.

"This is a growing problem. It started before the pandemic and became a crisis situation during the pandemic and it is going to continue … so we must make this change," she added.

The organization released a report last month that highlighted the issue of high rental fees and demanded policy changes. It surveyed 50 businesses owners in Ontario, including Waterloo region, and found that nine in 10 businesses say rent is a huge stressor.

Pearce said the report called on the province to:

• Create commercial rent guidelines for year-over-year increases.
• Mandate standardized commercial leases so tenants know what to expect to pay on top of rent.
• Create a dispute resolution mechanism.

"If we want good jobs and we want communities, with the kind of diversity and character that we love, then we have to help small businesses with this out-of-control cost and very unstable situation," said Pearce.

She said the organization has not heard back from the province. 

The associate minister of small business did not respond to a request for comment from CBC K-W in time for publication