New York City thinks up to half of restaurants will close permanently [pdf](osc.state.ny.us)
osc.state.ny.us
New York City thinks up to half of restaurants will close permanently [pdf]
https://www.osc.state.ny.us/files/reports/osdc/pdf/nyc-restaurant-industry-final.pdf
146 comments
Why didn't the landlord offer this "2 years no rent" deal to the existing "favorite coffee places"?
I'm not sure replacing established successful businesses with new ones is a fair trade...
I'm not sure replacing established successful businesses with new ones is a fair trade...
I have no clue why not, but a similiar thing has happened in the rental market. Lots of landlords keeping the rates of apt. the same, and forcing people to move out.
Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead.
Many, eventually do capitulate, but this seems to take months or even more (for some, their building contracts have to reset, as there are REITs involved, etc).
It is some kind of human psychology at play. This is similar on how so many tech companies refuse to give meaningful raises, and have employees leave. the replacement is always more costly.
Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead.
Many, eventually do capitulate, but this seems to take months or even more (for some, their building contracts have to reset, as there are REITs involved, etc).
It is some kind of human psychology at play. This is similar on how so many tech companies refuse to give meaningful raises, and have employees leave. the replacement is always more costly.
> Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead.
This one is easy to explain. Commercial real estate (which includes apartment buildings with 5+ units) is valued strictly by the amount of income it can produce, i.e. what the monthly rents are. If you drop the rent from X to 0.67X, you've basically cut your property value by 1/3. If you give a rebate of 4 months free rent, the effect on the property value is basically 0.
This one is easy to explain. Commercial real estate (which includes apartment buildings with 5+ units) is valued strictly by the amount of income it can produce, i.e. what the monthly rents are. If you drop the rent from X to 0.67X, you've basically cut your property value by 1/3. If you give a rebate of 4 months free rent, the effect on the property value is basically 0.
This also inflates “market rate” and justifies higher prices for rent as well as government subsidized housing (which is just reduced rent because part of the rent is paid for from the market rate). By paying for “free months” themselves the rent prices never go down in the area and the market never corrects itself, leaving prices to either stay the same or rise always.
I don’t know about the dynamics in NYC but in SF a lot of landlords can afford to keep commercial spaces vacant, and apartments emptied out. The opportunity cost in not leasing out can be made up for by holding out for tenants that will overpay on the commercial side, and rent control makes renting apartments out for too low a price unappealing on the residential side.
Kill both Prop 13 (entirely, not just sections of it) and rent control and you might see some normalcy return to the California property and rental market.
Kill both Prop 13 (entirely, not just sections of it) and rent control and you might see some normalcy return to the California property and rental market.
It's not just prop13 and it's not just in California. The Federal reserve has been buying mortgage backed securities to keep the market from correcting (similar to ~2008.) Because of this you can finance the construction and sale of small amounts of luxery space without having to worry nearly as much about being able to rent it for a profit.
Essentially we have insane inflation but it's been carefully architected to only really affect real estate.
Essentially we have insane inflation but it's been carefully architected to only really affect real estate.
Yep. At least in Europe it's standard for many or even most restaurants to go bankrupt every couple of years to get rid of debt, and start again in the same pace soon after.
The fact that half the restaurants are closing doesn't mean there isn't demand for those restaurants and employees after the pandemic.
The fact that half the restaurants are closing doesn't mean there isn't demand for those restaurants and employees after the pandemic.
> The guys (different owners) just got a great deal on the lease for the first two years, and they will just need to make employee expenses.
its a TRAP, He most likely signed usual 10 year $20-40K/m for a 2000ft hole in the wall with foot traffic NY lease. Super enticing amount of free months is there to lure you in. The trap is he probably personally guaranteed (house mortgage?) the lease, not the restaurant business running the place.
https://www.youtube.com/watch?v=LW1-FicJMAc
its a TRAP, He most likely signed usual 10 year $20-40K/m for a 2000ft hole in the wall with foot traffic NY lease. Super enticing amount of free months is there to lure you in. The trap is he probably personally guaranteed (house mortgage?) the lease, not the restaurant business running the place.
https://www.youtube.com/watch?v=LW1-FicJMAc
It is generally bad for societal trust when those who have invested in the system are suddenly uprooted and have their investments destroyed. It is more likely that the next potential cafe owners are thinking, “Why risk opening a cafe if it might be irrationally shut down?”
you were not in NYC in march, were you? Lots of people just refused to go to work, or do outside things when the death toll started climbing in Italy, to the point it was all over the news.
Everyone knew it was a matter of time when it would hit NYC, and when it did, we were blind as there was no testing available to people unless you ended up in the ICU.
My soccer team just forfeited their mach, as team members did not feel safe to play while the virus was spreading. This was way before the lockdown in early march,
I stoped going to the gym too. People just didn't feel safe, and even if things were open, people would just not go out.
Almost, all places were at about 30% capacity. In the long run, they'd still have failed. People just wont/don't like to go out or travel.
You can still go in places like Albania, or Turkey, or Greece, who managed the virus/had low levels of it, yet their tourism is not doing well at all as many folks don't like risking it.
Everyone knew it was a matter of time when it would hit NYC, and when it did, we were blind as there was no testing available to people unless you ended up in the ICU.
My soccer team just forfeited their mach, as team members did not feel safe to play while the virus was spreading. This was way before the lockdown in early march,
I stoped going to the gym too. People just didn't feel safe, and even if things were open, people would just not go out.
Almost, all places were at about 30% capacity. In the long run, they'd still have failed. People just wont/don't like to go out or travel.
You can still go in places like Albania, or Turkey, or Greece, who managed the virus/had low levels of it, yet their tourism is not doing well at all as many folks don't like risking it.
That was six months ago. As far as I’m concerned, the leadership in NYC has been completely ineffective and incompetent. The rest of the world is basically moving past the virus, while New York is considering even more restrictions.
ardit33(2)
This data from Yelp is pretty stunning:
"The restaurant industry continues to be among the most impacted with an increasing number of closures – totalling 32,109 closures as of August 31, with 19,590 of these business closures indicated to be permanent (61%)."
https://www.yelpeconomicaverage.com/business-closures-update...
"The restaurant industry continues to be among the most impacted with an increasing number of closures – totalling 32,109 closures as of August 31, with 19,590 of these business closures indicated to be permanent (61%)."
https://www.yelpeconomicaverage.com/business-closures-update...
I think people's memories are a bit short regarding just how dire things were in NYC back in April. I think things are a bit more complicated than just blaming the governor for shutting down restaurants.
Every resident in or around New York heard ambulances 24/7. Everyone knew someone that got very sick (not that anyone could even prove that they had it since testing was extremely scarce). The virus was still very new and there were legitimate reasons to suspect the death rate was much higher than it thankfully ended being. I even remember hearing rumors from friends, family, and coworkers that the feds were going to enforce a "wuhan-style" quarantine in NYC. In terms of general fright, it reminded me a lot of 9/11.
It would've been political malfeasance for the mayor/governor to do nothing in these circumstances. In terms of infections, the city recovered relatively quickly and most of the lockdown was lifted by Summer (indoor dining obviously being one of the holdouts here that hurt restaurants a lot)
I think the worst "medium-term" effects are the loss of tourists and office workers. There's very few legal restrictions on offices reopening at this point, but very few have actually come back. The triple of lockdowns, vanishing tourists, and vanishing office workers is just too much for small businesses.
Every resident in or around New York heard ambulances 24/7. Everyone knew someone that got very sick (not that anyone could even prove that they had it since testing was extremely scarce). The virus was still very new and there were legitimate reasons to suspect the death rate was much higher than it thankfully ended being. I even remember hearing rumors from friends, family, and coworkers that the feds were going to enforce a "wuhan-style" quarantine in NYC. In terms of general fright, it reminded me a lot of 9/11.
It would've been political malfeasance for the mayor/governor to do nothing in these circumstances. In terms of infections, the city recovered relatively quickly and most of the lockdown was lifted by Summer (indoor dining obviously being one of the holdouts here that hurt restaurants a lot)
I think the worst "medium-term" effects are the loss of tourists and office workers. There's very few legal restrictions on offices reopening at this point, but very few have actually come back. The triple of lockdowns, vanishing tourists, and vanishing office workers is just too much for small businesses.
> There's very few legal restrictions on offices reopening at this point, but very few have actually come back. The triple of lockdowns, vanishing tourists, and vanishing office workers is just too much for small businesses.
I think this is key. For people trying to blame the governor of New York, just look across the political spectrum to Texas. I am not a fan of Greg Abbott in any sense, but I will give credit where credit is due, and I think his Covid policies have been very reasonable and based in science and data. And even with those looser restrictions, restaurants in major Texas cities have still been hit incredibly hard. Downtown Austin is still pretty ghost-town like, and all the businesses that cater to those downtown office workers and tourists have been devastated despite there being relatively few official restrictions left on offices.
I think this is key. For people trying to blame the governor of New York, just look across the political spectrum to Texas. I am not a fan of Greg Abbott in any sense, but I will give credit where credit is due, and I think his Covid policies have been very reasonable and based in science and data. And even with those looser restrictions, restaurants in major Texas cities have still been hit incredibly hard. Downtown Austin is still pretty ghost-town like, and all the businesses that cater to those downtown office workers and tourists have been devastated despite there being relatively few official restrictions left on offices.
People are protecting themselves. Most are avoiding restaurants, bars, and gyms completely. It doesn't matter that they're open.
Trump has the right idea, that people need to be made less afraid of the virus. But his execution is backwards, people aren't idiots.
The priority should have been relaxing laws to allow existing businesses to do delivery. Allowing stores to sell goods outdoors in the parking lot. Getting a couple good masks to every citizen, even though it meant reusing them. Actually useful things, instead of telling everyone not to worry about it.
Trump has the right idea, that people need to be made less afraid of the virus. But his execution is backwards, people aren't idiots.
The priority should have been relaxing laws to allow existing businesses to do delivery. Allowing stores to sell goods outdoors in the parking lot. Getting a couple good masks to every citizen, even though it meant reusing them. Actually useful things, instead of telling everyone not to worry about it.
Indeed. Half of all COVID deaths in the US by early May were in the Boston-DC metropolis. The per capita death rate for NYC, even after almost no COVID deaths over the last two months, is still 1 in 570, 4x the national rate of 1 in 2300 (along with NJ; CT, RI, MA and LA round out the list of <1 in 1000).
Also NYC hit a hospitalization rate of 1 in 700 at the peak. Legitimate forecasts had hospitalization rates potentially blowing out available capacity. The worst State hospitalization rate now is 1 in 4600, 6x better.
On the other hand, consider the threshold for “just a bad flu” to be twice the per capita death rate from the 17-18 flu season (CDC upper estimate of 1 in 5000, so 1 in 2500). Then half of the US states are still in the “just a bad flu” or better six months on. And even that skewing to the old. Nine states haven’t reached the 1 in 5000 level of the 17-18 flu after 6 months. So, for a lot of the US, their experience was, and continues to be, different than the East Coast and certain key cities like Detroit and St Louis. My numbers say 30% of the US population is in this category.
Also NYC hit a hospitalization rate of 1 in 700 at the peak. Legitimate forecasts had hospitalization rates potentially blowing out available capacity. The worst State hospitalization rate now is 1 in 4600, 6x better.
On the other hand, consider the threshold for “just a bad flu” to be twice the per capita death rate from the 17-18 flu season (CDC upper estimate of 1 in 5000, so 1 in 2500). Then half of the US states are still in the “just a bad flu” or better six months on. And even that skewing to the old. Nine states haven’t reached the 1 in 5000 level of the 17-18 flu after 6 months. So, for a lot of the US, their experience was, and continues to be, different than the East Coast and certain key cities like Detroit and St Louis. My numbers say 30% of the US population is in this category.
> The per capita death rate for NYC, even after almost no COVID deaths over the last two months, is still 1 in 570, 4x the national rate of 1 in 2300
That's the per capita death rate for New York state.
The proportion of people who died in NYC with a positive COVID test or with cause of death listed as COVID is more like 1 in 255.
That's the per capita death rate for New York state.
The proportion of people who died in NYC with a positive COVID test or with cause of death listed as COVID is more like 1 in 255.
The state of the US economy, and society, is so incredibly frightening to me because we seem to no longer have a collective, shared experience and goals.
On one hand, people like me in the tech industry are doing fine, or better than fine. My job is secure and my skills are in high demand. On the other hand, I have friends who are highly skilled artists (musicians and dancers) who are going through the worst depression in a lifetime. Many trained intensively since early childhood, managed to succeed in a career where very few make it, but now are considering leaving that career, because they need to eat. It's beyond heartbreaking, and because of our general isolation right now I don't see us doing much (us as both a society and through government) to support these people right now. Yes, things will eventually improve, but in the meantime we are going to lose a generation of talent.
On one hand, people like me in the tech industry are doing fine, or better than fine. My job is secure and my skills are in high demand. On the other hand, I have friends who are highly skilled artists (musicians and dancers) who are going through the worst depression in a lifetime. Many trained intensively since early childhood, managed to succeed in a career where very few make it, but now are considering leaving that career, because they need to eat. It's beyond heartbreaking, and because of our general isolation right now I don't see us doing much (us as both a society and through government) to support these people right now. Yes, things will eventually improve, but in the meantime we are going to lose a generation of talent.
> The state of the US economy, and society, is so incredibly frightening to me because we seem to no longer have a collective, shared experience and goals.
When has this ever been true?
When has this ever been true?
[deleted]
Exactly. I don't think US as a melting pot has ever had a shared experience. That hasn't slowed the economic growth.
And yet when I suggest that we re-open spaces for the young and healthy, and let the old and infirm decide to quarantine for themselves, I'm called inhumane and callous. The elite of this country have decided this is the sacrifice we will make - sorry for your friends, hopefully they get jobs in a warehouse or manage to get on the government dole.
The disease also kills young people and can do significant damage even if you don't die from it.
How many young people have died so far in the US?
I don't necessarily disagree with the premise that isolation (and support for those in that isolation) should be directed at those at greater risk, especially when Covid has such a divergent risk profile based on age and other factors.
That said, my (relatively young) friends are classically trained musicians and ballet dancers. They are still screwed if their audience, which skews older, can't attend. This dynamic exists in lots of places, e.g. keeping kids home from school is extremely detrimental to their development, but what do you do for elderly teachers and professors?
That said, my (relatively young) friends are classically trained musicians and ballet dancers. They are still screwed if their audience, which skews older, can't attend. This dynamic exists in lots of places, e.g. keeping kids home from school is extremely detrimental to their development, but what do you do for elderly teachers and professors?
I still say, let everyone make the decision for themselves. Many old people (the majority) that get COVID don't die, but recover. They can attend performances.
I don't see why we need to destroy everyone's lives for a minority of high risk people. Let everyone make their own decisions rather than use the iron fist of government to decide for us.
I don't see why we need to destroy everyone's lives for a minority of high risk people. Let everyone make their own decisions rather than use the iron fist of government to decide for us.
It's not only high risk people who get the disease, or even only high risk people who die. And, those same "young and healthy" people you're wanting to let loose still suffer serious aftereffects. You're trivializing it by saying "only old people die," not the least because it's it's not true.
Further, those young people who don't die still take the disease back out into public with them, spreading it elsewhere. This is why simply saying "let people who think they are invulnerable do whatever" doesn't work, because even if they are in fact unkillable their actions can still result in the deaths of others.
Disagree - the statistics say the vast majority of those who get COVID when they are young recover. This is why outbreaks at colleges get a lot of attention for the cases, but no follow up because no one dies. You look at the oddball death and panic over it. But this is not the norm!
Binary live-vs.-die statistics aren't the full story. This illness is known to cause lingering side effects (lungs and heart) that in particular would affect those in physically demanding careers -- e.g. musicians and dancers as was mentioned by OP.
https://www.cdc.gov/coronavirus/2019-ncov/long-term-effects.... https://www.washingtonpost.com/sports/2020/08/08/athletes-co...
https://www.cdc.gov/coronavirus/2019-ncov/long-term-effects.... https://www.washingtonpost.com/sports/2020/08/08/athletes-co...
What is the incidence rate and magnitude of COVID effects in young people? One should naturally expect such a follow up question when quantifying death and risk in public policy.
Can you quantify how much damage the virus will do to young people, including the incidence rate of serious side effects in young people?
> I still say, let everyone make the decision for themselves. Many old people (the majority) that get COVID don't die, but recover. They can attend performances.
While we're at it, let's do the same with drunk driving. After all, most intoxicated drivers don't actually get into accidents and many drive large safe cars that protect them well. Why shouldn't they get to decide their own risk preference for themselves? /s
While we're at it, let's do the same with drunk driving. After all, most intoxicated drivers don't actually get into accidents and many drive large safe cars that protect them well. Why shouldn't they get to decide their own risk preference for themselves? /s
Because your beliefs directly challenge those who believe everyone must wear a mask, and everyone be locked down. No one can stand to be challenged anymore, and they react very negatively.
The lockdowns are also disproportionately affecting smaller businesses. McDonalds can afford to be closed, while the local diner can’t. Expect MegaCorp to grab even more market share.
Quite. Even extremely moderate measures like commercial lease subsidies for small businesses could have helped enormously, but governments at all levels just don't seem to particularly care.
There were a thousand possible ways to navigate this crisis well - Germany's wage-subsidizing Kurzarbeit system has frequently been cited. But all of them require some measure of political will and imagination, and that seems utterly lacking in America. I can't think of a single city or state which has even really tried to do more than the bare minimum.
There were a thousand possible ways to navigate this crisis well - Germany's wage-subsidizing Kurzarbeit system has frequently been cited. But all of them require some measure of political will and imagination, and that seems utterly lacking in America. I can't think of a single city or state which has even really tried to do more than the bare minimum.
The “local diners” in the USA have been sourcing all their food from Sysco for years if not decades now. Sure, not being part of a franchise gives an aura of being independent, but even smaller eateries in the USA are still pretty much corporate.
It’s an expression. Every independently-owned restaurant in America doesn’t get its food from Sysco.
Could you imagine a world where the trillion dollars corporate bailout went to those small restaurantes and others small businesses instead? Or maybe where businesses booming -thanks to the quarantine- such as Amazon where forced to pay taxes instead of using legal loopholes to avoid paying any? Maybe both changes at the same time? Oh but that sounds too much like socialism and we can't have that devil around do we?
It's a good time as any to remember this website where each pixel represents $1000 so you can get a good grip about how money is being hoarded by the ultra-rich: https://mkorostoff.github.io/1-pixel-wealth/
It's a good time as any to remember this website where each pixel represents $1000 so you can get a good grip about how money is being hoarded by the ultra-rich: https://mkorostoff.github.io/1-pixel-wealth/
I am hoping that the ones that remain can charge a sustainable price for their product when dinging out becomes a thing again. Restaurants are notoriously bad for working conditions and wages. May be they can charge enough to pay their workers better.
Restaurants have notoriously thin margins. I don't see why that should change in the future. Paying their workers better won't happen unless there's a specific reason for it.
This is incredibly sad. My favorite restaurant in the world closed in San Francisco - its such a tough time for that industry.
Which one? But yeah I don't think we are going to fair any better.
Walzwerk SF :(
Mine as well in Toronto.
Seattle checking in.
Same.
Same.
[deleted]
This is really a sad news. If you happen to visit Australia, come and visit The Clayton Hotel (theclaytonhotel.com.au). The Clayton Hotel comes with a rich history, we are extremely proud of what we have become today. Many people from neighboring cities of Clayton, Victoria, Melbourne, Australia loves visiting us.
The long term trend of restaurants being closed in favor of ghost kitchens has just been accelerated due to COVID. It's just not sustainable to keep paying for brick and mortar when everything's moving online and to on-demand delivery. Retail is next.
I strongly disagree on the premise that the food itself is not what drives people to go out to eat. It's the experience, the setting, the service, ordering a drink, getting out of the house, and the welcome distraction that drive people to restaurants.
Restaurants that make their money from people looking for a fine-dining experience are a minority of NYC restaurants, especially in Manhattan. Most eateries are serving workers.
I don’t know. I haven’t had a single good take out or delivery meal, beyond food types that were generally deliverable pre-COVID. Delivered sushi? It’s rubber. A crisp pan seared chicken breast? Also rubber. Don’t even waste your time with a steak. Once we get through this pandemic the restaurant industry will sky rocket.
The quality of delivered food is usually pretty underwhelming for me.
I mean, why don't we all just live in our bedrooms forever? We can order everything we need from Amazon, order our groceries and meals online, and zoom with our coworkers. Who needs physical human contact?
MatthiasP(2)
This is terrible for sure, but it's worth remembering that 60% of all restaurants close within their first year of operation and 80% within 5 years. The restaurant industry in a city like New York is incredibly cut-throat.
There is a subtle (perhaps unintentional) sleight of hand here.
60% of all new restaurants close on the first year. That is very different than half of *all restaurants, even those that have been open for decades, closing in a single year.
60% of all new restaurants close on the first year. That is very different than half of *all restaurants, even those that have been open for decades, closing in a single year.
Sure, but the same distinction is missing from the city's report. Which half of the city's restaurants are going to close permanently because of covid? Likely those that were on the edge of failure rather than well-established ones.
So McDonalds, Taco Bell, Dunkin Donuts, Joe's Pizza, and 711 get to stay open yay
It's not about asking "which half". It's that the numbers cannot be compared. If 90% percent of restaurants stay open forever, 60% of new restaurants could close in their 1st year but only 6% of existing restaurants would close. If we say 50% of existing restaurants will close due to covid, comparing that to 60% makes no sense, it needs to be compared to 6%.
You are right that the 60% of restaurants that will fail are likely the ones that were on the edge anyway, however, this is a different distinction.
I think the more important distinction is that this is 60% of ALL restaurants, not 60% of the 10% of new restaurants (or 6% of restaurants).
(I made up the 10%, but I'm sure it is small.)
I think the more important distinction is that this is 60% of ALL restaurants, not 60% of the 10% of new restaurants (or 6% of restaurants).
(I made up the 10%, but I'm sure it is small.)
observationally, this doesn't seem to be the case. In NYC, the way it looks is that restaurants that were doing a brisk delivery business before the pandemic are still with us and a lot of great restaurants that were packed with in-person diners are gone. There are tons of exceptions. Source: Brooklyn.
One of my favorite coffee places in Manhattan closed this summer. I was bummed. Their lease was up for renewal, and it didn't make sense for the owner to renew it as all of the office worker traffic was gone.
Two months later, there is a new coffee place at that spot. The guys (different owners) just got a great deal on the lease for the first two years, and they will just need to make employee expenses. One of the baristas, was actually the same barista from the previous coffee place.
so, many places will close, and new restaurants will eventually open, hopefully with better/cheaper leases, which in Manhattan is a major expense, and kinda crazy compared to other cities.
I think a lot of the businesses that depended on office workers are going to close. While the ones that are in more residential areas, with available outdoor seating, will fare a bit better.