Soaring Rents Make Life Tougher for City Restaurants

Crain's New York reported recently about the impending demise of many New York City restaurants as landlords continue to raise rents. The article cites restaurateur Pino Luongo's eatery Tuscan Square in Rockefeller Center as an example of one long-term restaurant going out of business (or at least, soon to be). Now, you can argue the toss as to whether Tuscan Square qualifies as a restaurant -- I think it's really more of a cafeteria / deli -- but the suggestion by Mr. Luongo that the city's restaurant business might be entering a recession echoes the broader economic trends we have been witnessing this week.

Other restaurateurs quoted in the article suggest that another reason for this decline is that diners are no longer ordering such expensive dishes and are cutting back on drinks, especially wine - typically the most expensive part of a meal. Again, this suggests that consumer spending is falling off as the economy's vitality ebbs away.

However, when the restaurateurs quoted also mention that their more popular prix fixe menus are around $29, and their a la carte choices are in the region of $40 -- is it any surprise that New Yorkers aren't splashing out? Said restaurant owners would swear that higher rents are forcing their prices up, and that is likely to be true, but in a city where a good deal is increasingly hard to come by, it is probably inevitable that some of the city's 17,000 restaurants fall on hard times when consumers are more strapped for cash.

Interestingly, and perhaps ironically, as we suggested in a post the other week, it largely only foreign tourists who find eating out in New York City a bargain these days due to currency exchange rates. Is a New Yorker's right to an affordable dining-out experience a livability issue? Indeed, if rents and property values continue to increase as they have, will New York's wonderfully diverse restaurant sector follow many other retail sectors in the city and become dominated by large, national chains offering homogenous fayre? Perhaps an economic recession might help drive rents down for a while, or at least stabilize them at rates restaurants can afford? But is this the only solution?