Business owner Colin Scott says Frontline Hobbies will abandon Hunter Street at the end of a lease in two years if trading conditions in Newcastle remain as they are.
Mr Scott culled Frontline Hobbies' footprint on the corner of Hunter and Crown streets from 1000 to 300 square-metres during construction of the city's light rail line in early 2018. The business had been operating in the city for about 40 years.
He moved majority of the store to Broadmeadow, citing the light rail construction work's "significant and unsustainable effect" on trade.
Now, five months after the launch of the light rail line, Mr Scott says he can not justify running the city store anymore.
"We have another two years to run on the lease," he said on Friday.
"Depending on whether town picks up or not, personally I don't think it will.
"I think town will develop into a cafe, restaurant culture. There's not major retailers there. We made the decision to move to Broadmeadow because if we stayed in our original position, we'd be bankrupt by now."
Mr Scott said a reduction in parking near the city store from the installation of the light rail line had reduced the worth of the location.
"There's not enough parking in the city," he said.
"There's no parking outside our old shop yet this light rail, if you look at it in Hunter Street, there's space in the middle for another road lane. Why they took up the whole area up I'll never know. They could have left space for another lane."
Frontline Hobbies is the lead respondent in a class action lawsuit against the state government focused on the impact of the light rail line's construction.
The lawsuit was organised by Sydney businesswoman and politician Angela Vithoulkas, who has also led a similar class action with Sydney businesses.
Sydney legal firm Mitry Lawyers are pursuing the action on behalf of almost 50 Newcastle businesses which have signed up.
Mr Scott said three private litigation funders had stepped forward to finance the Newcastle lawsuit.
A meeting will be held at Reserve wine bar in Newcastle on Sunday, July 28. Mr Scott said it was the "last chance" for businesses to join the class action.
"Businesses are invited to attend to be briefed on the progress of the action and also any business not already involved who thinks they may have a case," he said.
"This will be the last chance to get on board and recover lost trade."
Earlier this week, the owners of Reserve announced they would be closing the bar after a difficult few years of dwindled trade. It followed a number of other businesses who either closed or relocated from the city in recent months.