Sidewalk space a hot commodity as city mulls permanent outdoor dining

Landlords seek to monetize free real estate amid uncertainty over pandemic lifeline’s future

Outdoor dining in Times Square at Tony's Di Napoli (Getty)
Outdoor dining in Times Square at Tony's Di Napoli (Getty)

At Beginnings, a literary-themed bar and restaurant in Atlantic Beach, owner Ben Freiser has doubled his seating during the pandemic. Adding to the existing patio and indoor dining room, he’s set up a commercial party tent in the parking lot and a second patio near the street.

Eighteen months into the pandemic, diners now demand outdoor seating — and restaurants must provide.

“I don’t think you can put a price on it,” Freiser said. “Never in a million years would I think that a parking lot was going to save my business during a pandemic.”

Absent the luxury of a parking lot that can be repurposed to increase outdoor capacity, most restaurateurs across New York City have sought to maximize their space under the city’s Open Restaurants rules, which allows eateries to place seating on sidewalks and in roadways.

But as the city mulls plans for a permanent version of the Open Restaurants program, landlords have been left uncertain on whether they can monetize their outdoor spaces. While outdoor dining is limited at some properties, like those adjacent to bus stops, Citi Bike installations or fire hydrants, areas without restrictions allow restaurants to take advantage of what is essentially free real estate.

Paul Fetscher, president of Great American Brokerage, which specializes in restaurants and retail, said he keeps hearing the same question from restaurateurs considering an available space: “Can I do outdoor dining there?”

But that free real estate is typically city property. And though the Department of Transportation, which has administered the Open Restaurants program during the pandemic, plans to launch a permanent program in 2023, the details have yet to be determined and the future of outdoor dining in the city remains unclear.

That means landlords can’t guarantee that the space they have now may be used the same way in the coming years.

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“It would be irresponsible of a landlord to make those kinds of promises, and truthfully, it would be naive of a tenant to accept those promises,” said Andrew Moger, CEO of BCD Development, a restaurant-focused brokerage.

That hasn’t stopped some landlords from taking advantage of the demand. Shlomi Bagdadi, CEO of Brooklyn-based brokerage Tri State Commercial, said that while landlords haven’t been raising rents quite yet, sidewalk accessibility and proximity to open streets are showing up in marketing materials for available spaces.

“It’s obviously not necessarily the landlord’s space. This belongs to the city if it’s on the sidewalk,” said Brandon Singer, CEO of the brokerage Retail by MONA. “But you can make the argument, if you’re a landlord, you’re going to be utilizing the space outside my building, you should pay me more.”

Diners “got accustomed to being in tiny spaces,” Bagdadi said. “And what the pandemic did is it opened up their eyes that what we as human beings need is more space.”

Landlords can, however, control and monetize the space on their property, and new tenants are gunning for as much outdoor space as possible.

Take Avra. The Greek restaurant signed a nearly 20,000 square foot lease at 1271 Avenue of the Americas in July 2020, winning CBRE’s Gary Trock and Zach Parisi a REBNY Most Ingenious Retail Deal of the Year award. Approximately 3,000 square feet of that space consists of outdoor patios.

“One of the amenities of selling that space was 225 sheets outdoors, that you’re not paying for,” said Trock. “It’s basically free. That’s a huge, huge bonus.”

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