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I have to have a counterpoint: One of my favorite coffee places in Manhattan closed this summer. I was bummed. Their lease was up for renewal, and it didn't

I have to have a counterpoint: 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.

unreal37 6y ago
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...
- ardit33 6y ago
  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.
  - SllX 6y ago
    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.
    - swiley 6y ago
      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.
  - pmiller2 6y ago
    > 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.
    - Scipio_Afri 6y ago
      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.
ceilingcorner 6y ago
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?”
- ardit33 6y ago
  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.
  - ceilingcorner 6y ago
    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 6y ago
      Huh? just last week both Italy and Spain re-instated restrictions, as the cases are flaring up again. Especially, in Madrid. What Europe are you talking about? There are still restrictions in the EU for traveling from outside-EU countries. This is not a usa, or nyc only phenomenon. I hate to say it, but you sound like a Trump troll. Madrid locks back down as European leaders sound alarm on Covid-19 surges Madrid is going back under city-wide lockdown measures after a surge in coronavirus cases in the Spanish capital, in a dramatic move that ... 6 days ago https://www.cnn.com/2020/10/01/europe/madrid-lockdown-coronavirus-europe-intl/index.html https://www.cnn.com/2020/10/01/europe/madrid-lockdown-corona...
tupputuppu 6y ago
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.
rasz 6y ago
> 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 https://www.youtube.com/watch?v=LW1-FicJMAc

unreal37 6y ago

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...

ardit33 6y ago
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.
- SllX 6y ago
  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.
  - swiley 6y ago
    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.
- pmiller2 6y ago
  > 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.
  - Scipio_Afri 6y ago
    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.

ceilingcorner 6y ago

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?”

ardit33 6y ago
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.
- ceilingcorner 6y ago
  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 6y ago
    Huh? just last week both Italy and Spain re-instated restrictions, as the cases are flaring up again. Especially, in Madrid. What Europe are you talking about? There are still restrictions in the EU for traveling from outside-EU countries. This is not a usa, or nyc only phenomenon. I hate to say it, but you sound like a Trump troll. Madrid locks back down as European leaders sound alarm on Covid-19 surges Madrid is going back under city-wide lockdown measures after a surge in coronavirus cases in the Spanish capital, in a dramatic move that ... 6 days ago https://www.cnn.com/2020/10/01/europe/madrid-lockdown-coronavirus-europe-intl/index.html https://www.cnn.com/2020/10/01/europe/madrid-lockdown-corona...

tupputuppu 6y ago

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.

rasz 6y ago

> 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 https://www.youtube.com/watch?v=LW1-FicJMAc