5/26/22, 6:26 PM What It’s Like Renting A Restaurant In Miami Right Now: Locals, Landlords, Newcomers, And Grease

ewcomers, And Grease Traps

Stories
Miami

What It’s Like Renting A

Restaurant In Miami Right
Now: Locals, Landlords,
Newcomers, And Grease
Traps

By Chris Mohney “I was born and raised in Miami in a Cuban-American

family,” declares chef and restaurateur Miguel Massens.
After learning the trade in Miami and elsewhere under big
names like Norman Van Aken and Thomas Keller,
Massens came back to his hometown in 2019 to test out
his own restaurant idea as a popup. Antilla operated at
the Time Out Market for three months, and that success
propelled Massens to start looking for permanent brick-
and-mortar space.

But even before the pandemic flipped the script, Massens

was fighting through the high-priced hurricane of South
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Florida restaurant real estate. He went looking at

“approximately 50 or 60 locations throughout Miami.” The
search made abundantly clear the serious risks of
prioritizing a flashy location. And the pandemic stress on
the local market only made the situation worse. “OK, what
kind of chef do I want to be?” wonders Massen. “Do I
want to compete with the Daniel Bouluds in Brickell?
Sure, but the reality is that if the market corrects, Daniel
Boulud will weather the storm, and I’ll be wiped out.”

So Massens is looking elsewhere. “I need to be

somewhere where it’s safe … In my opinion, the best value
is Coral Gables. Unless you’re on the prime corner next to
Hillstone, anything else in the Gables, you’re paying 40 to
50 percent less than you would in the Design District or
Brickell. You can’t get into Brickell and expect to survive
unless you have big-shot money behind you.”

Despite those seemingly bulletproof rent rates, Miami’s

restaurant and hospitality industry suffered through 2020
as badly as anywhere in the country. One estimate puts
the loss to Miami-Dade County restaurant revenue from
the six months of March through August 2020 at $742
million, compared to the same period in 2019. Statewide,
the Florida Restaurant and Lodging Association pegs the
number of restaurants shuttered by the pandemic at
10,000 closures.

A combination of factors improved Miami’s restaurant

prospects earlier than elsewhere. The warmer climate
meant it was easier to accommodate outside dining.
Florida resisted extended lockdowns and other
restrictions, becoming one of the first states to allow
indoor dining at restaurants again. And an influx of out-of-
state investment created a “gold rush” mentality that
drew in restaurant operators looking to expand to South
Florida.

And those rents have not gone down—for the most part,
commercial rents have held firm or even increased over
the course of the pandemic, and restaurants are no
exception. In fact, outliers on the high side for marquee
restaurant space are more expensive than ever. Consider
that the insanely popular Miami outpost of New York
restaurant Carbone is reportedly paying $80,000 per
month in rent for their prime South Beach spot.

The Gold Rush Hits Miami

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Carbone Miami.
Photo: Douglas
Friedman

Massens is amazed at the skyrocketing restaurant rents

at the top of the market. “I was expecting … a bottoming-
out of prices,” he says ruefully. “Brickell at $100 a square
foot? Maybe this will come down to $70 or $80.
Wynwood, instead of $65 or $70, maybe that will come
down to $50 or $55, something a little bit more
reasonable. But because all these New Yorkers just piled
in, the prices never dropped.”

Even some of those New Yorkers are having a hard time

swallowing high rents. Omar Ali-Shamaa, an attorney at
the law firm Wolfe Pincavage who specializes in
hospitality negotiations, says that while the hot
neighborhoods in Miami remain hot, lack of space was
driving restaurants to look further afield even before the
pandemic. “You started to see areas like Little River and
Little Haiti and places like that where well-known
restaurants were expanding in those areas. … Chef
Marcus Samuelsson’s restaurant opened in Overtown, the
Red Rooster. That’s traditionally not an area you’d see a
lot of these types of restaurants open, but the periphery
is starting to expand, partly because the market was
slightly saturated and there was not enough inventory.”

The arrival of Major Food Group—New York’s 800-pound

gorilla of restaurant operators—in the form of the splashy
Carbone is often marked as the start of the out-of-state
rush. But it’s worth remembering that Miami has attracted
out-of-state restaurateurs for a long time. Many of them,
like Simon Kim, arrive on the heels of success elsewhere
that gets them in the door while not necessarily floating
on a tidal wave of cash.

In 2019, Kim was coming off the success of Cote in New

York, and decided on Miami for his second location of the
restaurant. “We signed the lease in Miami,” he recalls,
“and then all of a sudden everything comes to a dead
stop. I was like, ‘Oh my God, this is the end of the world.’
This is how you fail, right? … And back then, I was not 100
percent funded, either. So imagine trying to court an
investor to give you money while every single restaurant,
including my own, is closed. Cote New York City was on
the verge of bankruptcy as well. It was sink or swim.”

Kim decided to blaze ahead with the new restaurant

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anyway. And as one of the few buildouts still underway, he

suddenly had no trouble getting it done. “Everybody—all
the contractors, all the designers—they lost all of their
projects. I decided to go against the grain and move
forward. So I was their only client, their only lifeline. I was
the only one that was paying them. So I was able to get a
lot of attention in a timely manner. It was a lot of work,
right? And I have two kids, a 3 year old and a 2 year old in
New York City, in a pandemic. So I feel like I went through
hell and back.”

Lyle Stern, president of commercial real estate firm

Koniver Stern Group, says it was really in the fall of 2020
that things began to change in Miami. He describes “this
wave of migration—wealth migration, population, et cetera
—started to come to Miami. … I wouldn’t say that we’ve
been deluged, but there’s been a consistent pattern of
restaurants coming from Toronto, coming from Chicago,
coming from LA, and certainly several from New York as
well.”

Felix Bendersky, owner of F&B Hospitality Brokerage, saw

landlords looking out of state to pick up the slack from
struggling local tenants. “It was like, ‘What do you have to
lose?’” he says. “Landlords were lucky if they were getting
paid. So you might as well bring in a sexy concept from
out of state—New York, Vegas, LA. You have a better shot
than going with a local upstart.”

“One thing that we saw from the pandemic,” observes

Drew Schaul, SVP of retail advisory and transaction
services at CBRE, “is that a lot of the new Yorkers and
people from the Northeast who moved here mostly to
take advantage of the tax benefits—they dipped their toe
in the water during the pandemic to see what it was like
living here, and they liked it. They were encouraging some
of their favorite restaurateurs in New York to open up
venues down here because they’re friendly with the chefs
and the owners of those restaurants.”

Building New vs. Second

Generation

Boi De restaurant.
Photo: Emily
Schindler
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The extremely tight inventory of Miami restaurant space

versus overall commercial vacancies can be chalked up
to two reasons. The first is that building a totally new
restaurant space in Miami is extremely difficult, expensive,
and time consuming. Extensive approvals and permits are
required for everything from liquor licenses to ventilation
to grease traps, with even more regulations expected due
to COVID and the Surfside condominium collapse.

That makes renting out a previously operating restaurant

—known as second-generation space—much more
attractive to everyone except really big spenders. But
Miami’s pandemic resilience ended up creating a crunch
on this type of space as well. “I had a realtor friend do a
search for all the second-generation commercial
restaurant properties in Miami,” says Miguel Massens.
“She came back to me and she’s like, ‘Wow, I’m really
surprised that the list was like 20 names. … I’m used to
seeing like 100 or 200. There’s nothing available.’”

“Construction costs right now are through the roof,” says

Chris Cuomo, VP and director of operations for Groot
Hospitality. “To get manpower and labor is so difficult, so
to find a good second-generation space is extremely
appealing. It definitely has made us look at spaces that
we weren’t considering before just because the bones of
the space were so good.”

With Miami’s rigorous regulations and tight market even

before the pandemic, broker Felix Bendersky makes
second-generation space a special focus. “Miami is
probably the hardest place to open a restaurant because
of zoning and codes,” he says. “Ask any operator about
the biggest challenge of opening in Miami, and they will
tell you, without a doubt: the grease trap.” Getting a
properly updated grease trap alone is hazard enough to
sink a business. “Permitting was a year out before … and
now it’s going to be 18 months to two years. Guys who
don’t know any better will start signing leases. They’ll set
that money aside for six months of expenses, but then
they’re going to find out that their free time is up, and
their permits aren’t done yet, and they have to start
paying rent. By the time they’re open, they’re done.”

“I’ve never seen Miami with no second-generation

restaurant inventory,” Bendersky laments. “Every broker, if
you go on Facebook chats, is asking for the same thing.
‘Does anybody have a second generation, 1,000 to
1,5000 square feet with a hood, with an updated grease
trap?’ That’s like saying, ‘Hey, have you seen my unicorn
lately?’”

Big developers and landlords still have new prime

restaurant spaces to fill. They’re looking for a solid
anchor amenity on a new condominium, for example—
something that will appeal to all those prospective out-of-

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state condo buyers. Bendersky works with them too.
“They’re looking at anywhere between $300,000 and
$500,000 for a ready-to-go restaurant. So they’ll come to
me and say, ‘Hey listen, we’re going to have to do
something anyway. We’ll give the operator that money, but
bring us somebody sexy. Bring us somebody from out of
town.’”

In every other case, Bendersky insists that building out a

new space is a bad idea. He thinks anyone looking to
open a new restaurant should wait until the inventory
opens up. For those who absolutely cannot wait, and who
like a second-generation space but can’t make a deal
with the landlord, he has a new piece of advice: Just buy
the building.

“Whatever happens with the restaurant,” Bendersky

explains, “whether the restaurant does well, whether it
doesn’t do well because of all the competition—they still
have that asset that’s really in demand right now. …
Between the investment they would have to make with
the lease, and with the prices getting as crazy as they are,
and landlords taking advantage of the market, it just
makes more sense to buy the building. Be your own
landlord. That way it decreases your risk if the restaurant
were to shut down because of COVID. With a landlord,
the first thing they’ll do is evict you because they know
what they’re sitting on. Then they’ll raise the price on the
next guy.”

High Rents And Landlord

Relations

Serena restaurant.
Photo: Michael
Kleinberg

Your view on restaurant rents in Miami depends on where

you sit in the business. Felix Bendersky has a very dim
view of the current rent levels, calling them “a bubble
that’s about to burst.” He complains that due to pandemic

t rno er “landlords got er er greed ith the

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turnover, “landlords got very, very greedy with the
restaurant space. Maybe a year ago they were charging
$28 a square foot, and all of a sudden you’re at $49 or
$50 a square foot.”

Higher overall vacancy only tends to cause lower rents if

the properties are listed as vacant. If landlords choose to
keep their spaces off the market, then the two statistics
don’t necessarily match up. Miguel Massens says that in
his experience, “All the good stock is taken. It’s strange,
though. I was living in North Miami Beach this past winter.
On my street, a major street, Collins Avenue, within a two
block radius there were five closures. … The little pizza
joint, the taco joint, the donut joint shut down. The real
estate landlords here are just very greedy. There are
locations that I’ve looked at that will sit empty for three or
four or five years. And you’re like, why doesn’t anybody
pick this up? Every time you look at the rent, they don’t
budge on the price. They know that eventually a Carbone
or somebody else will move in and pay the money.”

Much of the haggling over rent and terms understandably

turns on the landlord’s own position and priorities. Roger
Duarte, CEO of Hospitality Capital Partners, has
experienced the full spectrum of landlord reactions to
pandemic pressure. “Each landlord is totally different.
Sometimes the landlords that are more sophisticated,
more in a corporate environment, they’re easier to
understand. They’re more compassionate. Then there are
landlords who say, ‘Look, you have your problems. I have
my problems. The contract says this. … And I’ll see you in
court if you don’t pay me.’ In one day I had a call: ‘Yeah,
Roger, we understand. Just keep in constant
communication. Do what you can do.’ And the other
landlord was like, ‘If you don’t send me the wire by
tomorrow at 1 o’clock, my attorney is calling your attorney.
… Figure it out.’”

While existing restaurants might have dealt with

inflexibility, those looking to sign new leases on vacant
spaces often had much friendlier interactions with
prospective landlords. For his new restaurant location in
Fort Lauderdale, Angelo Abennante, owner of Lynoras
restaurants, was offered enough free rent to expand
when he hadn’t been planning to. “Typically, landlords give
four to six months at best. They offered us the whole year
of free rent. That gave me the time to really understand
the market and to take it slow, get through the pandemic,
and not have to worry about opening immediately. Plus
they did come down about 10 percent, 15 percent from
their normal rate as well.”

Many landlords were proactive about supporting their

tenants through the pandemic, given that it’s bad for both
parties if the restaurant shuts down. “We worked very
closely with every one of our tenants,” says Scott
Sherman of Tricera Capital, “giving them relief early on …

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helping them get whatever grants were out there. Across

our whole portfolio, we lost less than a handful of tenants
throughout the pandemic. … In my mind, I’d rather come
out of this pandemic with tenants than having empty
buildings because all my tenants went out because they
couldn’t pay the rent.”

The Future: Long Boom Or

Bursting Bubble?

Swan restaurant.

Lyle Stern at Koniver Stern is very happy with Miami’s

restaurant outlook. “I know from the number of restaurant
deals we’re working on now, that will open in the last
quarter of 2021 or the first quarter of 2022, that several
new, large, important restaurants will open in Miami and
Miami Beach,” he says. “We wish we had more spaces.”

By contrast, hospitality broker Felix Benderksy tells his

restaurateur clients, “Don’t do it right now. Wait. There are
all these people who are coming down, who don’t have
experience, who are maybe being backed, who just
wanted to come down here because this is where they
want to be. A lot of those places are going to be back on
the market in the next six months. … Let’s say there’s 1 to
2 percent of second-generation [space] available in
Miami right now. I think that number will go to 25 percent
by winter. That’s what I’m seeing in terms of random
people signing leases who have no right signing them and
overpaying.”

Miguel Massens is equally skeptical “This thing is

scraping on thin ice,” he warns. “It’s not normal that a
successful chef in New York City is doing a 3 to 5 percent
profit margin.” He’s not rushing to rent out a space before
he’s ready. “I’m in it for the long haul. … Nobody has a gun
to my head saying, ‘You have to open up a restaurant.’ At
the end of the day, I need to open up something that’s
going to be profitable, that’s going to be there for the long
term. I have no problem waiting.”

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And while some don’t mind the competition, locals like

Nicholas Garcia, CEO of restaurant-bar-wine-shop
concept Vinya, are watching the newcomers carefully.
“Miami has a very unique culture and unique identity.
There’s a little bit of wariness from a lot of people, from us
included, about what this influx does to water down that
culture and that identity. In the short term, it’s really a
great thing. It’s going to push Miami to do some really
great things in hospitality and food and beverage. But in
the long term, we need to be very careful that we hold
true to that identity and that we’ve got enough local
investors that are willing to take a chance on Miami so
that we don’t lose that.”

Simon Kim of Cote is one of those newcomers, and he’s

making a point of respecting that local identity. He says,
“Every restaurateur friend from New York at some point
has reached out and asked: ‘How’s it going? What are
some of the do’s and don’ts?’ … One of the most
important things is: Do not underestimate the Miami
clientele’s palate. … if you are interested in coming to
Miami, you need to do your homework, and you need to
understand what Miamians really want. Just like New
Yorkers, they are sophisticated. They have their own
taste, and they know what they want, and if they don’t get
that, they’re going to cold shoulder you. I think that’s the
biggest pitfall that people from New York sometimes fall
into: ‘I made it in New York.’ Don’t take Frank Sinatra’s
words verbatim.”

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