In 1995, the restaurateur Jonathan Morr opened a 3,800-square-foot noodle shop called Republic on Union Square West in New York City, paying an annual rent of $220,000. “The rent was relatively inexpensive for what it was,” he said. “But remember, when I opened, Union Square was very different than it is today. There was very little there along with the drugs in the park. At the time we were taking a risk.”
Twenty-two years later, Union Square has been gentrified beyond recognition. It's home to a Whole Foods supermarket and an apartment building whose penthouse sold for more than $16 million. And now Republic is on its way out. Morr said he expects to close the space by the end of 2017, three and a half years before the lease expires. “It’s just a fact of life—there’s no way that we’re staying there after the lease is up,” he said. Taking advantage of an impatient landlord, Morr plans to leave the space early and will "split the difference between what [the landlord] gets from us and what he’ll get from the next tenant, and call it a day," he said.
Republic is joining a slow but distinct restaurant exodus from the area, following in the footsteps of Danny Meyer's Union Square Cafe, whose prohibitively high rent forced it to search for a new space in 2015. "There's no such thing as a New York restaurant that's immune to real estate," said Richard Coraine, the chief of staff for Union Square Hospitality Group. He noted that the original, 1985 rent for USQ was $4,500 a month. A roughly fivefold increase over 30 years is what prompted Meyer to move his beloved restaurant to its current home, on a corner a few blocks northeast of Union Square.
The space currently occupied by Blue Water Grill, also on Union Square West, is being formally marketed to potential tenants for close to $2 million a year, according to Leslie Siben, a principal at LB Realty Services LLC, who has been approached about the property. "There’s no way there won’t be a lot of turnover there as tenants who have been there for a really long time face the notion of 'fair market value,'" she said, adding that the astronomical rents are an unsurmountable barrier to many potential food service occupants. "Think about those numbers: That area is going to have to become a food desert, [because] no normal restaurateur with any experience would touch that as it is now."
"The rent at this location was just recently raised to well over $2 million," wrote a spokesperson for Landry's, the owner of Blue Water Grill. "Even though this is one of New York's most successful restaurants, it can't be successful with a $2 million plus rent; therefore, we will be relocating within the next year. In the meantime, it is business as usual."
Deserts Where There Were Once Oases
Rising rents and real estate turnover are hardly new phenomena, but Union Square West—along with other desirable residential areas of New York such as Smith Street in Brooklyn and lower Bleecker Street in Manhattan—have seen their rents become so prohibitive that most of their restaurants—with the exception of chains, or flagship “loss-leaders”—are forced to move elsewhere.
Twenty years ago, Union Square West represented the most dynamic culinary blocks in New York. Republic was a very early pan-Asian restaurant with a focus on noodles and bowls, where the bestselling Pad Thai cost about $6 and the most expensive dish was marinated salmon on rice for $8. Blue Water Grill, set in a former bank, specialized in grand seafood tableaus. The Coffee Shop Bar, which opened in 1990, featured towering models serving mojitos, plantain chips, and pressed sandwiches late into the night. (Coffee Shop Bar looks like it will remain open, but the original Heartland Brewery, which had lived next door to Republic since 1995, closed on New Year's Day 2015.) For people looking for future food trends around the city, Union Square West was the place to be.
Now the storefronts around those restaurants have been taken up by Starbucks and Dylan's Candy Bar, and rumors are that yet more spaces will soon have a For Rent sign out front. “When rents go up, it makes the viability of restaurants harder,” said Stephen Sunderland, the senior managing director of Optimal Spaces, a tenant broker in the city. “You have to think of restaurants as artists, or neighborhood pioneers,” he explained. “They come into a neighborhood, it becomes hip, and that’s the source of their demise,” he said. “They create the trends that undo them.”
Restaurant leases tend to be on 15-year terms, which means that to outside observers, a "food desert" can appear to creep up without warning. A neighborhood is seen as up and coming, and exciting restaurants begin to move in. Roughly two decades later, when leases come up, prices spike because gentrification followed, and those restaurants are forced out. The net effect is a replacement of independent food entrepreneurs with a smattering of chain restaurants.
“What happens to a retail neighborhood where there’s nowhere to eat?” asked Sunderland rhetorically. “The desirability goes down” for future residents.