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HIGH TIDE-NAVIGATING NEW YORK’S RISING RETAIL LEASING RATES

August 3rd, 2013 No comments

New York is a town defined by diversity and disparity. From East New York to the Upper East Side, everyone is here. And everyone wants to come here. Variations in retail rents reflect this rich mixture. Soho rents are so much more expensive than South Street’s. Madison Avenues leases for far more than Midtown. Fifth Avenue in Manhattan is a million miles in pricing from Fifth Avenue in Park Slope. All are defined by the same dilemma of rapidly rising rents. What makes New York incredibly attractive to retailers also makes it incredibly expensive. Sticker shock is common to new entrants to the market.

Retail rents are surging, pushed by high levels of tourism coupled with a prospering local economy. Fifth Avenue, Times Square, and Madison Avenue have historically demanded the highest prices. SoHo has joined these neighborhoods as a prime shopping location for both tourists and locals. The limited supply of available space, especially in the most sought after corridors, adds to price pressure. However, a good broker can guide a client toward the goal of great location.

The REBNY Spring Report notes “Asking rents in Times Square on Broadway and 7th Avenue between 42nd and 47th streets jumped 55 percent to $2,175 psf ” The Real Estate Weekly article “Luxury Retailers Jumping on Soho’s Brand Wagon” of April , 2013 reports that “the famed Fifth Ave strip saw the second largest price growth rise at 15.2 percent, and still is the most expensive retail rent area in the city, with the average asking price hovering around $2,631 psf

A WWD article from May 2013 reports “asking rents for available ground-floor space on Madison Avenue between 57th and 72nd Streets increased 36 percent to $1,325, since the fall.” In SoHo, according to The Business of Fashion’s article, “The Shifting Winds of New York Retail, “the concentration of international fashion and luxury brands is thicker than almost anywhere else on the planet.” According to the Crain’s article from April 2013, “SoHo Joins the Top Tier as Retail Rents Cross $1K Mark,”“SoHo is taking its place alongside Fifth Avenue, Madison Avenue and Times Square as a must-have location for retailers.” The article adds, “For a long time, there were brands there because it was hip and it was sexy, but they weren’t necessarily making a lot of money,’ said Michael Glanzberg, of Sinvin Real Estate”. “Now there are a lot more shoppers who come and really spend, not just a few hundred dollars, but thousands on luxury items.’” The article continues that “rents on Broadway have soared more than 50%, to $756 per square foot” and “on Prince Street between Wooster Street and Broadway, SoHo’s priciest block, rents did better, ballooning 65% to $850 per square foot on average”

With such a low supply and a high demand for space in SoHo, an article in The New York Times from December 2012 reports that “luxury clothing brands that would normally flock to Prince and Spring Streets, are facing little inventory and sky-high rents, and so are now searching out these smaller side streets.” As a result “Rents on side streets such as Wooster and Mercer have doubled from about $150 per square foot to close to $300 per square foot on average”

Other neighborhoods that are experiencing changes in reputation as well as retail rents, include the West Village, Meatpacking District, Chelsea, Herald Square, Lower Fifth Avenue and the Flatiron District. WWD reported in a May, 2013 article that “Bleecker Street between Seventh Avenue South and Hudson Street rose to $540, also an 18 percent increase.” Meatpacking rents escalated significantly “as the neighborhood has completed its transition from blood-soaked industrial use to a 24-hour shopping and nightlife destination,” according to Real Estate Weekly’s article “Pioneers Breaking Newest Ground.” Due to the multitudes of tourists who walk down the High Line, rents climbed “10 percent to $356 psf.”

The Post’s article “$50M Makeover On Tap for Herald Center,” explains that “Macy’s went more upscale [and] The Gap, Forever 21, Victoria’s Secret and H&M moved in nearby and prospered.” The article reports properties in the heart of Herald Square between West 33rd and 34th streets are asking “$1,200 per square foot for roughly 10,000 square feet at sidewalk level” REBNY reports rents “in the Flatiron corridor along Fifth Avenue between 14th and 23rd Streets [where] asking rents also rose 37 percent to $413 psf since spring 2012”, and that “the Flatiron shopping corridor along Broadway between 14th and 23rd streets saw a significant increase in asking rents with a 50-percent-increase to $322 psf since last spring.” In Flatiron North, “asking rents are between $115 and $175 per square foot”

What’s a retailer to do? Few but the largest can pay the price for the more glamorous locations. That’s always been so. There are always alternative blocks and neighborhoods offering reasonable rents with the right traffic mix for any particular product. It’s difficult to chart the course to find such a location at an affordable price, on a block with a desirable co-tenancy. Treacherous waters to navigate even for experienced local retailers. A wrong turn and you’re sucked into a Bermuda Triangle vortex of high rent and low business. Who sets sail without a captain? And that’s what an experienced broker should be; sailing clients s through turbulent seas, straight to the fabulous Fantasy Island of pure profit. Choose one who knows the waters and arrive quickly and safely. Bon Voyage.

Grease Trap or Grease the Wheel- NBAT-The Kinder, Gentler, City Agency Offers Help for New Food Businesses

December 29th, 2010 No comments

The daunting task of negotiating the maze of city agencies has gotten easier. As reported in the New York Times article of December 28, 2010, before opening, a new food business might have to face up to 11 different departments, and secure up to 30 different permits, registrations, licenses, and certificates, and pass 23 inspections. The New Business Acceleration Team helps new restaurateurs through the jungle of the permitting process.

According to administration officials, the 200 establishments serviced so far, have opened, on average, 10 weeks faster than planned. Nice, considering how little free time is often offered in a new lease. Currently the team is comprised of four inspectors, plus supervisors from agencies that issue permits, like the Depart of Health, Department of Buildings, Fire Department and Landmarks. The hope is that at one point there will be a single restaurant license that would replace all others. A long range goal is something like a Mayor’s Office of Hospitality.

NBAT works with qualifying businesses to schedule and coordinate most required inspections and, when appropriate, to schedule multi-agency inspections on the same day. For example, NBAT works with the Bureau of Fire Prevention to ensure the timely submission of plans and equipment documentation as well as provide inspections regarding range hood devices and other hazardous installations. NBAT inspectors are also trained to conduct Department of Environmental Protection grease interceptor inspections ensuring that grease traps are correctly sized to handle grease discharged by cooking and kitchen equipment. NBAT works with the Depart of Health to ensure that all food service establishments are properly permitted and operating safely. NBAT, and the Department of Buildings, work together to ensure the safe and lawful use of buildings and properties while facilitating the issuance of Certificates of Occupancy and Place of Assembly permits.

The ideal participants in this program are generally; new restaurants, bars, bakeries or butcher shops seating 50 people or less. Qualifying bars must serve food. However Batali’s mammoth Eataly found a way to be serviced. While a new venture, it is hardly a small place, and ownership is hardly inexperienced. As always, there is a way around certain limiting requirements. Therefore I suggest all who are opening a new food business to seek this valuable help. For complete information, as well links to the specific city agencies involved, go to: http://www.nyc.gov/html/nbat/html/about/about.shtml

Good luck- get picked and get open quick.

Comprehending Commercial Kitchens

July 18th, 2009 No comments

By Steve Rappaport

Setting up a commercial kitchen can be a daunting task, especially for a new restaurateur. Managing the installation of equipment, acquisition of permits, and adherence to laws, can give any prospective restaurant owner a headache. In an attempt to help ease the process, below is a general overview of, and guide to setting up a commercial kitchen.

According to the New York City Building Code, all commercial cooking equipment that, through their use, produces smoke or grease-laden vapors must be accompanied with an independent exhaust system. An exhaust system has a few basic components.

First there is the hood, which is an enclosure or canopy installed above certain cooking equipment to collect fumes, sprays, smokes, or dusts. Hoods are classified into two types by the New York City Mechanical Code. A Type I hood serves cooking appliances that produce grease or smoke, such as griddles, fryers, boilers, ovens, ranges, and wok ranges. A Type II hood serves cooking or dishwashing appliances that produce heat or steam, but not grease or smoke. These appliances include steamers, kettles, pasta cookers, and dishwashing machines. Different regulations apply to the two hood types. Most of the equipment we discuss will pertain to cooking appliances in the Type I hood category.

The size of a hood will vary depending on the appliance for which it is installed. For example, the inside lower-edge of a canopy-type commercial cooking hood must extend a horizontal distance of at least 6 inches beyond the cooking surface edge, on all open sides. Vertically, the front lower lip of the hood must be no more than 4 feet above the cooking surface. Noncanopy-type hoods, on the other hand, must be positioned no more than 3 feet above the cooking surface and the edge of the hood must be set back no more than 1 foot from the edge of the cooking surface. For more information regarding kitchen hood installation, consult Section 507 (Commercial Kitchen Hoods) in Chapter 5 of the New York City Mechanical Code, found at http://www2.iccsafe.org/states/newyorkcity/Mechanical/Mech-Frameset.html.

The next element of an exhaust system is the duct system. The duct system is essentially a series of ducts that run from the kitchen and lead directly to the exterior of the building, for the purpose of removing smoke and grease-laden vapors from the cooking space. There are many rules that govern the installation and maintenance of ventilation ducts, commonly called black iron.

One such rule dictates the exhaust air flow rate of a duct depending on the type of cooking done and the size of the hood. For example, for a wall-mounted canopy hood serving an extra-heavy-duty cooking appliance, the net exhaust airflow must be at least 550 cubic feet per minute (CFM) per linear foot of hood. For a wall-mounted canopy hood serving a heavy-duty cooking appliance, the minimum net exhaust airflow is 400 CFM per linear foot of hood. For a medium-duty cooking appliance, the minimum net exhaust airflow for a wall-mounted canopy hood is 300 CFM per foot of hood, and for a light-duty cooking appliance, it is 200 CFM per linear foot of hood. More information regarding these rules for different types of hoods can be found in Section 507.13 (Capacity of hoods) in Chapter 5 of the New York City Mechanical Code, found at the link provided above. Additional laws can also be found in Section 506 (Commercial Kitchen Hood Ventilation System Ducts and Exhaust Equipment) in Chapter 5 of the Mechanical Code, in Section 802 (Vents) in Chapter 8 of the Mechanical Code, and in Section 503 (Venting of Equipment) in Chapter 5 of the New York City Fuel and Gas Code, found at http://www2.iccsafe.org/states/newyorkcity/FuelGas/FuelGas-Frameset.html.

One essential question often asked by prospective restaurant tenants is where venting should be installed, and where it should terminate. The answer to this question will differ in accordance with the type of venting required by the equipment used (see Table 503.4 in Chapter 5 of the Fuel and Gas Code). For example, Type L vents, suitable for listed combination gas and oil-burning equipment, which should comprise most cooking equipment of the Type I hood category, must terminate no less than 2 feet above the highest point of the roof penetration and no less than 2 feet above any portion of a building within 10 feet.

It is important to remember that along with any exhaust system, one must also have a makeup air system. Fixed air supply openings must be installed to provide makeup air for air exhausted through the exhaust system. General rules for makeup air can be found in Section 508 (Commercial Kitchen Makeup Air) in Chapter 5 of the Mechanical Code.

The third feature of an exhaust system are grease removal devices. Grease removal devices can take many forms, including grease filters and residue traps in grease ducts. There are a multitude of laws that regulate the clearances, cleanouts, and termination locations of grease ducts, many of which can be found again in Section 506 in Chapter 5 of the Mechanical Code.

Should all of these regulations and codes seem overwhelming, there is no need to worry. Companies that provide exhaust system installation services should be fully aware and up-to-date with all existing laws and guidelines. The information provided in this article is not intended to be all-inclusive, and is only meant to enlighten readers on the general arrangement of a commercial kitchen. It would be helpful for prospective restaurant tenants to ask their real estate brokers for recommendations on any such service companies, as it is likely the broker has worked with restaurant tenants before, and knows which companies are reliable. Additionally, as restaurateurs will often find the law advises them to follow the system manufacturer’s instructions, it will be ever more important for them to find an experienced, dependable company to install their commercial kitchen exhaust system.

Possible further additions, and sometimes alternatives, to exhaust systems include different types of pollution control units and filters, such as electrostatic precipitators, wet or air scrubbers, charcoal filters, and other systems of filtration. For more information on how to keep the environment of a commercial kitchen clean, restaurant owners should speak with a representative from the company they ultimately choose, and discuss which options would work best for them.

All the exhaust equipment we’ve discussed thus far has dealt with the upkeep of the cooking space environment, and with fire prevention. But commercial kitchens also need to have a system in place in case a fire occurs. Here’s where the last piece of the puzzle, the fire suppression system, comes in.

Fire suppression systems, or ANSUL systems as they have come to be known, are handled by the New York City Fire Department and, less directly, by the New York City Department of Buildings.

In order to obtain an approval from the Fire Department for new fire suppression system installations, a New York State Licensed Professional Engineer or Registered Architect must draw up complete plans of the installation. The plans, signed and sealed by the Licensed Professional Engineer or Registered Architect, must be filed with the NYC Department of Buildings and the NYC Fire Department— specifically, with the Department’s Technology Management Rangehood Inspection Group. The plans will be reviewed by the Technology Management Rangehood Inspection Group Plan Examiner to ensure they comply with all requirements.

A Licensed Master Fire Suppression Piping Contractor must then install the fire suppression system, conduct a performance test of the installed system in front of a Fire Department Rangehood Inspector (the fee for which is $285 per system), and service the system.

Most Licensed Master Fire Suppression Piping Contractors can provide “turnkey” service, which means they can arrange for the preparation, signing, sealing, and filing of the system plans in addition to installing, testing, and servicing the system.

Licensed Master Fire Suppression Piping Contractors are only authorized to service systems made by certain manufacturers, so it is important to check that a contractor is authorized to perform work on the system planned for installation. A list of Licensed Master Fire Suppression Piping Contractors provided by the Fire Department can be found on pages 5 to 7 of the document at http://www.nyc.gov/html/fdny/pdf/fire_prevention/range_hood.pdf.

After the performance test is conducted by the Fire Department, and is found satisfactory, the Department will issue a Fire Department Approval Letter, and will tag the system remote manual pull station. The Fire Department tag must remain on the pull station for further inspections by the Fire Department, which will occur on an annual basis. Permits are reissued after each inspection, provided that the system continues to meet the legal requirements. The fee for this annual inspection is $70 per system. The annual inspection is performed to make certain that the system is properly maintained, that components of the exhaust system are regularly cleaned (at least once every three months), and that the fire suppression system is inspected semi-annually by a qualified company.

Hopefully this article has provided a broad overview of the process involved in setting up a commercial kitchen. While it may seem difficult, it is far from impossible. Many restaurant owners seeking a new store often require that venting be previously installed in the building, in an effort to save money and time. However, those willing to invest by installing an exhaust system themselves can profit in the long run, as they would be paying less for an unimproved space. It is ultimately a judgment call, to be decided on a case-by-case basis.