A personal view of course, but the latter approach is preferable, namely the sequential test should be applied for consistency. I think the justification for this is the thin-end of the wedge argument - setting a precedent that the sequential test need not apply to small units may well open the flood gates for similar applications. I would also argue that its not all about size in terms of sq.m. For example, plenty of take-aways, whilst small in size, generate considerable footfall of a type that is particularly suited to a town centre. Retail units within a centre also generate a critical mass that is mutually beneficial to neighbouring units and the centre as a whole, which would be lost if they were allowed to develop in isolated sites.
