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Restaurant owners are cutting deals and feeling optimistic about a pandemic recovery

Restaurant rents have dropped, and restaurateurs who sat out the cold weather are beginning to reopen. But the industry may be off kilter for a while.

Sean Green and Nikeah Green between takeout orders at their new restaurant, BBQ Unlimited, 246 Market St.
Sean Green and Nikeah Green between takeout orders at their new restaurant, BBQ Unlimited, 246 Market St.Read moreTYGER WILLIAMS / STAFF PHOTOGRAPHER

Ravinder Singh heard about the coronavirus racing through Europe, Asia, and his native India on March 11, 2020. The next day, he cleaned out his Center City Philadelphia restaurant, Samosa, and put a sign in the window: “Temporary closed due to rapidly spreading corona. God bless all. Be safe.”

Then Singh went home to New Jersey to wait it out. Samosa, at 1214 Walnut St., was among the first restaurants in Philadelphia to shut down because of the virus, four days before the government closed indoor dining for what turned out to be nearly six months. Over the next year nationally, an estimated two million jobs and $240 billion in revenue were lost, and 110,000 restaurants closed temporarily or permanently.

Samosa, whose signature buffet is unthinkable in a pathogen-wary world, is still closed and has no firm reopening date. Yet Singh seemed optimistic about the future of restaurants. “I’ll reopen when I feel it’s safe,” he said last week. “I will be back.”

It takes an optimist to open a restaurant even in good times, and many in the business seem to believe that we have turned a corner. “After all the gut punches and the openings and closings and the fall shutdown, there’s hope we have gone through the worst already,” said Ben Fileccia, who, as an official with the Pennsylvania Restaurant and Lodging Association, is one of the industry’s links to Harrisburg and Philadelphia City Hall. Still, a National Restaurant Association survey in late February said six of 10 restaurateurs don’t see a return to normal for seven months.

Signs of recovery are apparent: Restaurant workers, who for a year have balanced personal safety against the need for income, are now getting vaccinated in droves. Spring should help encourage outdoor dining. Governments are loosening indoor-seating restrictions. Financial relief is coming, in the form of $25 billion in targeted assistance to independent restaurants. Restaurateurs who chose to sit out the cold weather are beginning to reopen; they are now seeing a labor shortage, at least for servers, who may have changed careers or bowed out of the workforce.

» READ MORE: Here's how the coronavirus stimulus plan will help Philadelphia restaurants.

But overall, despite the hope and the fact that new restaurants are on the way, the industry will be out of kilter for a while, perhaps for a long while. The downturn appears to be most obvious in Center City Philadelphia, where offices are still largely closed, throttling the downtown lunch trade. Tourism is off, conventions are nonexistent. A key indicator of the industry’s health can be found in liquor licenses, whose prices in Pennsylvania are based on supply and demand. In February 2020, a high point in the open market, a restaurant license in Philadelphia County would sell for about $185,000. Right now, several are available at $135,000 to $145,000, said Edward Taraskus, a Philadelphia lawyer who specializes in liquor law. Prices in the Pennsylvania suburbs fell, but only modestly, he said.

When it became apparent last spring that the “two-week” shutdown would stretch for months, restaurateurs entered “pure survival mode,” said Larry Steinberg, senior managing direct at Colliers International. Some deals were scuttled. But toward the end of 2020, the more financially sound restaurant groups began to look for opportunities, especially if the real estate included outdoor dining. Steinberg said the former Mexican Post restaurant at Three Parkway, which has a 5,000-square-foot patio, was suddenly on restaurateurs’ radar after having sat empty since November 2013. The site has multiple offers, he said.

» READ MORE: Philadelphia-area restaurants that closed in 2020 and 2021

Openings are on the horizon — the splashiest projects had been planned before the pandemic — and the commercial real estate market has begun to thaw. People are signing restaurant leases, some to fill establishments that didn’t make it. Many of these “second-generation” spaces, requiring little more than redecoration and a few equipment upgrades, are available at steep discounts, creating opportunities for new restaurateurs. “Landlords want to work with tenants,” said Jacob Cooper, managing director of MSC Retail, a large brokerage, who said that smaller, more nimble restaurateurs began looking for space last fall, ahead of the larger groups.

Before March 2020, Sean and Nikeah Green, a South Philadelphia couple with catering company BBQ Unlimited, had a tidy business setting up at lunchtime in Center City offices through the Fooda service and doing private parties and events off-site.

When their work vanished, the Greens — like countless other restaurants and caterers — searched for new ways to make money. They leased space in a delivery-only “ghost” kitchen in North Philadelphia, where DoorDash and Grubhub drivers shuttled their ribs and mac to a waiting public. But the rent was high and the landlord did not market them on the delivery apps, as promised, Sean Green said.

They shopped for a fully outfitted restaurant, and found a former Indian eatery through Michael Kahan of Colliers at 246 Market St. It had been on the market for $7,200 a month, and Sean Green said they got it for $4,500 “with everything we ever wanted, including an Old City address.” Rent for the 6,300 square feet was about $1,500 less than what they paid for the 200-square-foot ghost kitchen. They started offering delivery and takeout at BBQ Unlimited, and hope to open soon for indoor seating.

» READ MORE: Philly restaurant owners are scaring up delivery business with ghost kitchens

Not all the deals are discounts. Steinberg said the Burger King on Eighth Street near Market, whose lease is expiring, has multiple offers at higher rent. The fast-food restaurant had been renovated just a few years ago, and the new tenant will not have to spend a lot of money on a fit-out.

Cooper, at MSC, said restaurateurs are “extremely sensitive to putting in capital now, meaning: ‘Hey, we’ll look at a deal. But it has to be turnkey or where the landlord’s got to fund the entire build-out.’” Cooper won a better deal for Baby Blues BBQ, which is moving down the block in University City to a much larger space for less rent.

Some landlords are agreeing to accepting rents based on a percentage of sales — “not some made-up square-foot number,” Cooper said.

Though business has picked up, “nothing is going to make up for 2020,” said Steinberg, of Colliers.

Meanwhile, there is renewed optimism for the suburbs, as more suburbanites work from home and not from a Center City office.

At Suburban Square in Ardmore, Avram Hornik will open a huge indoor/outdoor bar-restaurant called Lola’s Garden, and Kevin and Cat Huang will open a branch of their Chinese restaurant, DanDan, this spring. Though both deals had been signed before the pandemic, neither restaurant group considered scuttling plans. Also on the near horizon is Di Bruno Bros.’ largest location yet, in Strafford Shopping Center in Wayne. The food retailer also signed its deal before the pandemic, but the work was delayed, as was seemingly every construction project.

On March 15, 2020, Justin Weathers and Joe Monnich — whose five restaurants are in the suburbs — signed the lease for a forthcoming pizza restaurant at Weatherstone Town Center in Chester Springs. It was the day before the shutdown. “We knew [the pandemic] was coming but wanted to lock in the space,” Weathers said. The developer, Hankin, said it knew that the target date would be hard to set. Weathers said they had the concept but not the name.

In late spring or early summer, they expect to open. Its name: Revival Pizza Pub.