NEW YORK —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Famed Brooklyn pizzeria Grimaldi’s and upstart cupcake maker Crumbs Bake Shop, both with fewer than two dozen locations and a consumer-friendly average ticket of $20 or less, view their businesses as recession resistant. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
“You might not take your staff out to dinner, but you are going to buy six cupcakes for your staff that will set you back $20,” said Jason Bauer, president and chief executive at Crumbs. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Crumbs will have 23 units in the New York area by year’s end. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
These types of tenants—previously overlooked for the perceived strength of national chains—are finding many factors in their favor today. Landlords who once had their pick of national brands are now more amenable to smaller players, and more willing to agree to tenant-friendly lease terms. In addition, small local operators are finding it possible to lease space on hot retail corridors that once were simply too expensive, as well as too desirable to national tenants, before the economy folded. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
“Here in New York landlords wanted a corporate signature, they wanted Starbucks,” said Joseph Isa, senior director at Winick Realty, who has actively been working on deals for Dunkin’ Donuts franchisees. “Now that things have dried up, [those same landlords] are coming back and asking, ‘Hey, is your guy still interested in the space?’” —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Both brokers and tenants say they are finding landlords more willing to negotiate on rent, concessions and amenities when it comes to local operators. Asking rents are holding steady, they say, but deals are actually getting done at 20 percent to 30 percent below the asking price. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
“We are seeing where business is trending, and what our number is, and making an offer and letting it sit,” Crumbs’ Bauer said. “Nine times out of 10 we are getting it.” —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Though fallout from the weak economy provides opportunities for tenants, it can create extra risks. Just as landlords seek tenants who can pay the rent, operators need to gauge their landlords’ ability to weather an extended downturn. Tenants should set up legal protections to their right to the space should the landlord, or original leaseholder in a subtenancy deal, falter. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
“There is now a whole new way to look at who your landlord is,” said Marc Frankel, managing director at Newmark Knight Frank Retail, a real estate advisor in New York. “Restaurants love taking over space that’s already built, but even if they are paying rent on time, if the person between them and the landlord goes into financial melt-down or default, they could be in jeopardy.” —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Despite the potential hurdles, local players are moving ahead. Crumbs has opened locations in shuttered Starbucks units, and Grimaldi’s Pizza, a stalwart in Brooklyn, is expanding into Queens and Manhattan. In September, Grimaldi’s owner Frank Ciolli inked a 15-year deal for a 3,300-square-foot space on John Street in the Financial District. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Given the massive layoffs on Wall Street, it might seem like a particularly tough time to debut in the city’s financial center. Ciolli said he and the landlord worked out a fair deal, and he is confident he can continue earning profits even in a down economy. He said the landlord reduced the rent to offset his cost of building out the store, in exchange for a guaranteed date of completion. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
The Manhattan store follows Grimaldi’s recent opening in Douglaston Plaza in Queens. For that deal the landlord wanted a business that would draw customers. Grimaldi’s has earned destination status, regularly drawing lines of customers for its pizza from coal-fired brick ovens. Ciolli and the landlord shared construction costs of the store and agreed to graduated rent increases that Ciolli approved, although he declined to elaborate. Some real-estate advisors said they were winning rent escalations for tenants in the third and fifth years of leases, instead of every year, which had been typical. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
Ciolli also worked out an extra perk in the Douglaston space directly related to the tough economy. Grimaldi’s prides itself on quality tomatoes, olive oil and mozzarella, and has not been willing to change its quality standards even as food prices have skyrocketed. Instead, Ciolli said, the chain will now double its orders to cut down on trucking costs, and will store the extras in a space he garnered as part of the Douglaston deal. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.
“In Douglaston we have a nice size storage area we were able to get [by] bargaining,” Ciolli said. —Even in the epicenter of the financial melt-down, smaller operators in New York are stepping up growth plans, finding friendlier landlords, better deals and extra perks as major national chains continue to shutter stores or slash expansion plans.