Deepening Doldrums For NYC Restaurants Renew Calls For Relief

Restaurants in New York City have been operating without capacity restrictions for months now, but customer visits have plummeted since the omicron spike, returning chefs and operators to an unpleasant but familiar refrain: desperately asking their landlords to be flexible. 

In New York City, restaurant bookings were down 68% at the start of this week when compared to January 2019, according to OpenTable reservation data. Though many hoped 2022 would bring better business — with widespread vaccinations and the reopening of many of the city’s attractions — the high rate of breakthrough infections, combined with winter weather, is keeping diners home in big numbers.

Restaurateurs are holding out hope that the federal government will provide more aid to the exhausted Restaurant Revitalization Fund. Others are putting their faith in landlords continuing to be understanding, even though government mandates allow full operations — and commercial evictions are now legal after the moratorium lifted last week.

“I think everybody thinks restaurants are fine now,” said Susannah Koteen, who owns Harlem restaurants Lido, Bixi and Fox. “Because we're not mandated to be at 50% or 25% [capacity], your landlord doesn't necessarily understand that sales are down so much because nobody realizes, unless they're in the restaurant industry.”

Just before Christmas, the booking cancellations began, Koteen said — business is down 35% off her projections.

“It's been a very, very painful time,” Koteen said. 

While there were nearly 9,000 cases over the weekend in New York City, a major drop from a week earlier, officials are warning that coronavirus case numbers are still extremely high. Those sliding cases have done nothing to bring people back to hospitality in great numbers so far.

“People, unfortunately, are afraid to go out, and I completely understand it,” said Gloribelle Perez, the co-owner of Barcha on First Avenue.

Koteen said she has had to close her Asian fusion restaurant Bixi two days a week because it's too quiet to stay open. One of her landlords agreed to let her avoid paying rent for the first three months of the year in exchange for paying double rent at the end of 2022. She said she is still negotiating rent payments with her other landlord.

“It's like, 'The governor didn't say you have to be closed so, why aren't you fine?'" she said. "Well, people are afraid to fight to go out, because they don't want to get Covid." 

She said she is praying — without much hope — that the federal Restaurant Revitalization Fund is replenished. The restaurant industry is ramping up the pressure on Congress to add more funds, but legislation drawn up has gone nowhere so far.

Mayor Eric Adams is one of 72 mayors across the country who wrote to federal lawmakers to push them to refill the funding, after the program ran out last July.  Many operators, like Koteen, missed out altogether, and the New York City Comptroller released data this month showing only 28% of the 5,500 grants in the city went to restaurants in low- or moderate-income areas.

“There's still hope, but it's going to take a real fight, which is very unfortunate because there's such dire need,” New York City Hospitality Alliance Executive Director Andrew Rigie said of the federal support.

There are some state and city programs available to restaurants, but Rigie said they are unlikely to turn things around for a restaurant in major distress.

“Every dollar is going to help, but if you need half a million dollars to pay off rent and payroll, that $5K grant from the city is great, but it's not going to be the difference between you staying open or shuttering,” he said.

Even amid this challenging atmosphere, activity from food and beverage tenants has been picking up. While only 24K SF of food and beverage space was leased on Manhattan's major retailers in the last quarter of 2021, according to CBRE, it was still the most active retail category of the year.

This year has started strong, said Meridian Capital Group President of Retail Leasing James Famularo, who added he has locked down 14 leases for F&B tenants in January already.

He said many landlords have been waiting for the commercial eviction moratorium to end. Though it has now expired, he said most landlords are more likely to try and reach an agreement with their tenants who are behind on rent.

“The courts are so backed up, they may be three to four years behind in cases,” he said. “My recommendation to all my clients is if you can agree, you know, negotiate and agree [that] somebody exit amicably, that's always your best bet.”

Restaurants that haven't been paying rent in their spaces don’t have as much bargaining leverage as they did earlier in the pandemic, he said, because there are abundant tenants in the market looking for that kind of space.

“If I can pick one category out of all categories of commercial space is the second-gen restaurant space, that is most desirable,” he said. “People feel like now is the time to jump in, and there's not going to be another time like this.”

For Perez — who runs Barcha, a Latin-Mediterranean-inspired restaurant and cocktail bar in East Harlem with her husband — government support hasn’t been an option.

They opened their restaurant in late 2019, and they weren't able to show a 25% drop year-over-year, meaning she couldn’t access the revitalization fund. Negotiations with her landlord have been delicate, she said, and she is hoping to reach an agreement regarding rent obligations amid the ongoing crisis.

“If you've ever been on a roller coaster without any harnesses, I would imagine that’s what it’s like,” Perez said. “I had hope all along, and I still do, but hope is not a plan. We have finally got to a point where we had to accept that nobody was going to save us.”

She said they pivoted as fast as they could, building an online platform for takeaway, making and selling honey and then operating at reduced capacity.

Through the pandemic, Perez said they worked to help feed healthcare worker locals who were food insecure, trying to secure donations on social media for help providing meals. She is now focusing on making the restaurant feel warm, welcoming and intimate — but still makes guests feel safe.

“People really want a cozy atmosphere where people aren't on top of them — so how do we create value and, you know, a really cool, chill vibe, without being the cause of increased anxiety of our guests,” she said. “We're still here, right? But that's not to say that we're not bruised, that we're not hurting.”