Jun 17, 2023 2 min read

The Restaurant Rental Landscape

Why is it such a different rental landscape for restaurants?
The Restaurant Rental Landscape
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I may not be in the business of real estate but I know a good deal when I see one and no I'm not talking about the deals we shell out at our co-working space Bworks. (Shout out to Josh Halpern - our latest Bworks tenant). I'm talking about snagging a great apartment in the peak season in Manhattan (my fellow New Yorkers know what I'm talking about here).

It's great to see that after an unprecedented run over the last two years, apartment renters are about to get some relief. After double-digit percent increases on new lease asking rents last year, tenants can now operate on an even playing field.

The average rental shows new lease asking rents “rose just 2% over the 12 months ending in May”, marking one of the “largest decelerations over any year in history.”

So why is this such a different rental landscape for restaurants? 54% of small business owners say they are paying more for rent now than they did six months ago, a new record for this data since it started being collected from 4,500 respondents since the beginning of the pandemic, according to data collected form Alignable. In the most extreme cases, 14% of small businesses say their rent has jumped by over 20% since December.

The continual increase has been problematic for restaurant owners. In April 2023, 49% of small restaurant businesses were unable to pay rent, a 15% increase from the prior month. That number has continued to increase throughout the year, at only 38% in January. Unfortunately, high inflation continues to hurt restaurants, with 54% of business owners citing high inflation as their top concern, according to U.S. Chamber of Commerce Small Business Index.

And yet, business owners continue to be optimistic. Branded’s thesis continues to be investing in technology that improves business operations, is to the benefit of operators, and hopefully makes money for investors. According to Sharon Miller, resident of Small Business and head of Specialty Banking and Lending at Bank of America, new technologies created to “retain and attract talent, and exploring new tools including artificial intelligence, to gain an edge in a highly competitive market makes small businesses poised for growth.” (NRN)

Despite a global pandemic, high inflation, and limited labor, just like Paul McCartney touring at age 80, restaurants find a way to remain resilient and keep coming back. 76% of small business owners say they are confident their business could withstand economic downturn, while 65% of business owners anticipate revenue growth in the next 12 months. (NRN) Small business owners, and specifically restaurant owners, tend to thrive and innovate in the face of hardship. It just may take some time to have them playing on the same field as the average renter – And new technology will certainly have a word.

Restaurant Industry Movers in the Market

—Data as of 6/16/2023

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