New York City retail rents have increased astronomically over the last decade or so. Many restaurateurs entered into 10 or 15 year leases when NYC was a different place with less trendy neighborhoods and much lower rents. Now, market rent has doubled or tripled and those restaurant owners with expiring leases are in a pickle.
The struggle is common one between lessors and landlords. Restaurateurs that signed a lease long ago have been benefiting from low rent for many years. Landlords have been losing out on market rent since rents started to skyrocket and are often waiting for the current lease to expire so that they can raise the rent. With rents in some neighborhoods reaching $5,000 per square foot, these increases are forcing many restaurants to move to less expensive neighborhoods or worse, close their doors. Even well known restaurants are falling victim.
Establishments as famous as Bobby Flay’s Mesa Grill have been forced to close. While others, such as the Union Square Café and Four Seasons might be in the same situation very soon.
But, is it the landlords fault? Some believe that the rental increases are the work of greedy landlords and that these property owners should realize that often times, a restaurant is responsible for making the neighborhood fashionable. Others can sympathize with property owners who want to make the most money and have the opportunity to do it in the thriving competition present in NYC.
With celebrity chefs struggling, it is nearly impossible for young entrepreneurs to start out in the NYC restaurant business. These young people are forced into the Brooklyn real estate market, which can be almost as tough. Some established restaurateurs have dealt with the rental problem by buying the property they hope to use for their restaurants. Unfortunately, this approach is not available to everyone and some organizations are therefore pushing for another solution to the problem.
If you are a restaurateur with an expiring lease, or are trying to enter the restaurant business and looking to negotiate a lease, it is in your best interest to hire an attorney experienced in these matters. The DiPasquale Law Group regularly practices in restaurant law and can help to get you into the property you want. Call us at (646)383-4607 for a consultation today.