Commercial rents in New York slumped through 2008 and 2009, according to Jared Epstein, vice president at real estate developer Aurora Capital Associates. They spiked again around 2012, “forcing any food concepts really to struggle opening up new shops — due to the cost of doing business versus the sales they were bringing in.”
Fast forward to today, and rents are finally starting to decline again in certain pockets of New York, Epstein told CNBC. “It’s nice to see a downturn like this at times. It allows the creative to come back into these neighborhoods.”
Last year, when real estate developers were having a hard time landing new retail tenants in New York because of sky-high rents, coffee companies and quick-service restaurants like Chipotle Mexican Grill “were the saving grace” as far as deals went and “the only guys keeping the lights on,” Brandon Singer, a retail broker for Cushman & Wakefield in New York, told CNBC.
Brokers are still looking to land food-and-beverage tenants to fill empty storefronts.
“The fact the rents are now declining — that’s what creates the opportunity for these players to come back into the market,” Epstein said. “And it’s great for the city. … [Food-and-beverage concepts] provide places for people to meet.”
Meanwhile, coffee giant Starbucks has seen its growth slow in the U.S. as it oversaturated the U.S. market with more than 14,000 locations. Next year, it will shutter 150 company-owned stores — three times the number it usually closes annually. Many of its locations, particularly in big cities, are cannibalizing each other’s business, the company has said. Although Starbucks hasn’t disclosed any of the locations it plans to shutter, it’s possible some will be in New York.
This comes on the heels of Starbucks’ closing of 379 Teavana shops in the U.S. earlier this year, some of which were in the New York area.
Other national rivals in the coffee space in New York include Dunkin’ Donuts, Joe & The Juice, Gregory’s Coffee, Pret A Manger and Peet’s Coffee and Tea. There are also plenty of local, mom-and-pop players that could likewise benefit from a Starbucks retrenchment.