Restaurateur Danny Meyer plans to relocate Manhattan’s Union Square Cafe from its 30-year home after lease negotiations ended without an agreement. It is one of the hard truths of New York real estate: Restaurants help revitalize neighborhoods, then are forced to close when their rents skyrocket.
The restaurant will close when its lease at 21 E. 16th St. expires at the end of 2015, said Jee Won Park, a spokeswoman for Meyer’s Union Square Hospitality Group. Talks between Meyer and the property’s landlord, Ari Ellis, broke down because of a disagreement about the rent, Ellis said in an interview.
The restaurant, which debuted in 1985 in what was still largely a rundown neighborhood, was the first for Meyer, who later started the Shake Shack burger chain. Union Square Cafe is the latest downtown dining establishment forced to shut down amid Manhattan’s soaring real estate values. Two weeks ago, wd~50, opened in 2003 by chef Wylie Dufresne, said it would close because a developer has plans for a new building on the Lower East Side site.
Ellis — whose company, David Ellis Real Estate, owns four other buildings in areas including the Meatpacking District and Midtown — said that while he hopes the two sides will come to an agreement before the lease ends, Meyer might have outgrown the space.
“All the great restaurateurs are leaving their small, quirky spaces and moving into these mega restaurants,” Ellis said. “They’ve moved past these sort of things and they can move into essentially any space they want, and to a large extent, have them built for them, which is wonderful for them but not so great for me, or the neighborhood.”
In the area that includes Union Square, retail asking rents increased 5 percent in the first quarter from a year earlier as more high-end businesses were drawn to the neighborhood, according to a report by Cushman & Wakefield Inc.
When Meyer opened Union Square Cafe, his rent was $48,000 annually, according to the New York Times, which reported the planned closing on its website late yesterday. RKF, the brokerage marketing the space, is seeking $650,000 a year from the next tenant, the newspaper reported.
“Eventually, they’re going to drive away all the people and places that make New York City interesting,” said Bobby Flay, who last year closed Mesa Grill, the Flatiron district restaurant that put him on the national map, when the rent doubled. A Midtown landlord offered him a prime location near Rockefeller Center, but ultimately leased the space to a TD Bank branch.
“What brings ghost towns to life? Restaurants,” said Mr. Flay, who opened Mesa Grill when lower Fifth Avenue was a windswept boulevard of abandoned garment businesses. “We blaze the trail, we do the hard work, and then we’re out.”
Ellis said demand for the space will be high because of its long association with Union Square Cafe. “The numbers that come in for a restaurant for that space will be as good as or better than I projected,” Ellis said. “The restaurant that comes in, if I’m lucky, will be a great operator like Danny, will be successful, and they’ll be there for another 30 years. If it’s not Danny, which I hope it is.”
Many of these restaurants — like Florent in the meatpacking district and Chanterelle in TriBeCa, both shuttered in recent years — opened in decaying neighborhoods, providing a wedge for gentrification. Now they say they can no longer afford to operate in the places they helped transform.Hearth, one of the first restaurants to bring artisanal cooking to the East Village, was just hit with a 65 percent rent increase.
In recent years, his Union Square Hospitality Group has focused expansion not on fine dining, but on its profitable Shake Shack burger chain: the 48th store opened last month in Washington, D.C. In 2010, the company closed its high-end Indian restaurant Tabla; in 2011 it sold the prestigious Eleven Madison Park to its chef and general manager; and in 2012, the company sold a 39.5 percent stake to an investment bank, which helped fuel growth for Shake Shack, now serving in London, Dubai and Kuwait City.