NEW YORK—The highest retail rents in a decade are pushing restaurant owners out of their traditional venues in Manhattan, where renewal of their lengthy leases would mean paying double or triple the rent.
Going back 10 or 15 years, when the leases were signed, Manhattan was markedly different. Many neighborhoods were run down, or not yet fashionable, and rents reflected that.
Leases usually stipulate incremental rent increases each year, of at least 3 percent as a rule of thumb, to cover inflation and other costs.
So restaurant owners with 10- or 15-year leases can, as the lease progresses and the neighborhood improves, benefit from below market rents.
Landlords, on the other hand, are often waiting for leases to expire so they can raise the rents to market rates, and cash in on their investments.
All-Time High
Faith Hope Consolo, chair of Prudential Douglas Elliman’s Retail Leasing and Sales Division, said the retail rents in Manhattan are at an all-time high.
“The key is fashion follows food. So very often the restaurant opens the door to the neighborhood, and then the game changer—the neighborhood becomes hot,” she said.
While restaurant owners pin the blame on the landlords, Consolo defended them, “Everybody slams landlords, because it’s easy, you know.
“I’m not going to say that all of them hold out for the highest rent. They are in a predicament—so many people clamoring for the same space. Do they stay with the same tenant or try someone new? It’s going to depend on the landlord, it’s going to depend on the location.”
