Delays in return to office hit midtown NYC restaurants
In August, the Gerber Group’s Manhattan bars and restaurants started hiring more workers in preparation for an influx of customers returning to the offices the following month.
The company’s labor shortage meant that these restaurants didn’t have enough staff even after the recruitment push. This turned out to turn out to be a blessing for them as they never saw the surge in business.
Scott Gerber CEO stated, “Obviously we were optimistic that everyone would begin going back to the offices in September. But with the delta variant it has been pushed back until October. In some cases next year.”
This is a common situation at many restaurants and bars in Manhattan’s Midtown. Restaurants rely heavily on tourists and office workers for their dinner and lunch sales, as there are very few residential properties.
The highly contagious variant of the delta coronavirus has forced many New York companies to abandon their plans for return to work. This means that the expected customers are not coming to New York. This has added pressure to a struggling midtown hotel industry that is trying to get out of the shadows of the pandemic.
Midtown Manhattan boasts nearly 250,000,000 square feet of office space. In the second quarter, vacancies reached a record 47.4 million square feet, or 19% of total space, according to data from Cushman & Wakefield real estate services.
Grant Greenspan is a Kaufman Organization principal and estimates that about one third of office workers are still living in their Fashion District buildings, located between 5th Avenues and 8th Avenues.
He stated that they are offering rent deferrals and relief for restaurant tenants who live in this neighborhood. “They are nowhere near returning to business.”
Others Manhattan areas with higher residential real estate concentrations have seen a faster recovery. According to Greenspan, Flatiron and Union Square are two examples.
Businesses that rely on Manhattan workers are more vulnerable to the unpredictable.
The Gerber Group’s Grand Central Station bar, The Campbell, relies on commuters who aren’t back in their full force. On Tuesday, the Metro-North Railroad saw just 120,500 riders, a drop of 54% from pre-pandemic.
Gerber explained that the hospitality organization is trying strategically to order food and hire workers. Forecasting the demand for alcohol is difficult because of ongoing supply chain problems.
He stated that there is plenty of backordered alcohol we are running out. He said, “For example, Casamigos Tequila is owned by my brother, which has been ordered back.” It’s been gone for several weeks.
Midtown coffee shops are struggling too. Bluestone Lane, an Australian chain inspired by Australia, has five offices in midtown.
Nick Stone, CEO of Bluestone Lane estimates that these offices have returned to 20-30% occupancy. The spring prediction of 70% occupancy for summer is still a distant dream.
He said, “I don’t think it will get dramatically better in the next six months.” “We have a big challenge before us.”
Stone indicated that Bluestone has been patient. In anticipation of big sales, the company won’t be adding many employees to those areas. However, Stone hopes that the shift to remote or hybrid workforces will encourage landlords to consider adding more amenities — like Bluestone’s coffee shops — to office buildings as a lure for tenants.
Stone stated that she believes the role of landlords will increase over the next twelve months as they bring coffee shops into the lobby and provide a better human-centric, social experience.
Ripco’s managing director Lindsay Zegans said that she is starting to notice an increase in requests for midtown restaurant space. Greenspan says that she doesn’t anticipate many restaurant owners signing leases in Midtown until their corporate employees have returned to work.
Some restaurants in midtown have experienced a solid rebound. Estiatorio Milos, which is a popular spot for power lunches, is one of them.
Tanja Yokum (the restaurant’s vice-president of marketing, public relations and marketing) said there has been strong demand at its Hudson Yards and West 55th Street locations for business lunches. However, she stated that most returning diners are senior-level managers and seem to come into the office using a mix schedule.
Yokum explained that although I haven’t witnessed the junior levels coming in as strongly, we are optimistic it will.