If you’d like to open a bar in New York City — be it a simple pub or a lush, trendy lounge — be prepared to wait a while… and get creative with the new watering hole when the wait is over.
On Sept. 6, the New York State Liquor Authority imposed a four-month moratorium on all liquor-license applications for bars, nightclubs and cabarets in Manhattan while it reviews its licensing procedures. The deaths earlier this year of two women who were killed after drinking at Manhattan establishments put nightlife under the microscope, a level of scrutiny that was already building with the growing litany of residential complaints in bar-heavy neighborhoods like the Lower East Side.
That’s forced prospective bar owners who’ve secured bar locations and applied for liquor licenses into a very expensive holding pattern.
Before the current licensing freeze, new bars opened in Manhattan at a dizzying rate. The blur-inducing pace was due in large part to operators’ tendency to take over spaces that were already set up for bars, but that, for one reason or another, had closed.
“If you look at our listings, you’ll see that we sell a lot of places that are already in existence,” says Alex Picken, president of Picken Real Estate and Nightlife Brokerage, which is based in Manhattan. “An existing establishment is good because the rent is usually lower, it’s fully fixtured, and the license is there.”
An existing liquor license can be transferred to a buyer temporarily by the state liquor authority, or NYSLA, and then reviewed for permanent status, during which time the buyer can also present his case to the local community board; transferred licenses are also included in the current moratorium.
New spaces present bigger challenges for tenants, including higher rents and getting a new liquor license, which was rarely simple — and never cheap — even before the full-scale halt.
“It’s getting tougher for start-ups right now. A fresh space that requires a new liquor license will deter people with less capital unless they have a big budget,” says Gregg Roberts, president of CitySites Commercial Group. “If the space is not an existing bar, we do the research for the license simultaneously with getting the space,” Roberts adds. “No one wants to invest a lot of time if it’s not going to be feasible.”
Brokers recommend hiring a liquor license lawyer at an early stage of property negotiations.
“We suggest that license issues are dealt with at the outset, and that would be done through a liquor license lawyer, who would also deal with the community board,” says Roberts. “A lawyer can paint a positive picture of the place and emphasize that it will help support the community and be a draw.”
Occasionally, Roberts says, a lawyer also might alter a license application to get it approved, such as “going in with a certain type of use and then changing it afterward.”
Though community boards can’t deny liquor licenses, they can be a formidable force for bar owners. “Often, if there are problems with community boards, you walk away,” says Warren Pesetsky, a partner at law firm Pesetsky & Bookman. “Sometimes I advise the client that it’s a struggle we don’t want to take on, but sometimes we sit down with the board and change things like the hours of operation to accommodate them.”
Pesetsky notes that frequently it’s the location of the bar, rather than the bar itself, that draws objections, particularly in areas such as the Lower East Side, where there’s a glut of bars. The area’s already got a long history of vocal objection to bars by residents of the area and by Community Board 3, which covers the East Village, Chinatown and the Lower East Side.
Because of neighborhood issues, finding a location for a bar in Manhattan is something of a catch-22: the best place to open a bar might also be the same area that draws complaints. For example, many brokers point new bar owners to the Lower East Side and the Meatpacking District, since bustling nightlife scenes already exist there.
Those same throngs sometimes scare off potential tenants; Dumann Realty agent Robert Murphy says he’s repeatedly shown Clinton Street spaces on the Lower East Side, but “deals never get off the ground because people are wary of dealing with Community Board 3.” Picken says that Community Boards 2 and 4, which represent the West Village and Chelsea, respectively, have also gotten tougher in this regard.
Picken recommends looking for spaces on Second Avenue in the 50s, an area he describes as “not under terrific scrutiny and that draws people with money,” while Butler Kane Realty director Jason Pennington suggests considering Hell’s Kitchen on the West Side. Going farther afield is also an option.
“Because it’s getting more difficult to open a bar, people are willing to be more of a destination and trail blaze,” says Pennington. Some tenants seek out streets that don’t get much foot traffic to avoid negative attention, or open in fringe areas such as Brooklyn’s Bedford-Stuyvesant, where costs are lower.
In general, landlords tend to charge more for “wet” use — a bar — than “dry” use, or any other type of business. Dumann Realty’s Murphy did a comparison of prices per square foot for wet and dry uses in Chelsea: on West 21st Street, for example, dry use was $65 and wet use was $225.
Some landlords simply don’t want bars in their buildings because of liability issues, noise, or because they fear that the hassles of obtaining a liquor license will cause a potential tenant to be unable to pay the rent.
“You just might pay a higher amount to get the deal done,” says Roberts. “We had a place on 34th Street between First and Second avenues where the landlord was not completely opposed to a bar — but it was not his first choice, so the high rent he was asking was not negotiable and the client paid a healthy premium for the location.”