How Covered Outdoor Dining Has Impacted Urban Real Estate
When the COVID-19 outbreak first broke, many non-essential businesses were forced to close. And while restaurants were never ordered to close completely, they were barred from welcoming diners at the start of the pandemic. And then, for a period of time, they were forced to limit capacity once personal food was back on the table.
Unsurprisingly, many restaurants have adapted by expanding their outdoor spaces. In suburban areas, this has often been accomplished by repurposing patio space or cutting parking lots.
But for urban restaurants, field service was a much bigger challenge due to the general lack of space. Many restaurants in the city don’t even offer on-site parking for staff. And so, for many, sitting outdoors has meant expanding onto sidewalks.
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However, that was a mixed bag. And in cities like New York, it’s actually become a significant problem.
When there is simply no space
In September 2020, New York made its outdoor dining program permanent. The program allows restaurants to use sidewalk space to set up tables and accommodate guests who want their meals served al fresco.
Although restaurants are allowed to offer indoor dining for their guests, many customers are reluctant to dine indoors due to COVID-19 concerns. That means al fresco dining is an opportunity for many restaurants to attract more customers — and revenue.
But not everyone is a fan of restaurants that usurp sidewalk space. In fact, New York City residents in particular have complained that alfresco dining leads to excessive crowding. And for those who live in apartments above restaurants, it can mean excessive noise at night.
Alfresco dining in cities like New York also opens the door to compliance issues. A recent survey of 418 restaurants in the city found that 93% violated at least one outdoor dining policy, according to a report by City Council Speaker Corey Johnson’s office.
The problem has gotten so bad that some residents are suing the city to get al fresco dining lifted. But if that happens, it could be disastrous for restaurants that rely on al fresco dining to attract diners.
Should real estate investors be worried?
Al fresco dining is a complicated subject. If this continues, it could prompt some residents to relocate elsewhere, leaving landlords with vacancies to fill.
But the bigger problem is the impact on local businesses. When crowded, impassable streets and inevitable food waste turn otherwise clean, open blocks into crowded, dirty blocks, non-restaurant businesses could end up losing customers. And if they choose to leave, it will cause problems for commercial landlords, not to mention the potential erosion of property values – something that typically happens when businesses in the area close anytime soon.
On the other hand, restaurant closures are also bad for neighborhoods and could hurt the value of residential and commercial properties alike. Therefore, from a real estate investment perspective, it is difficult to know who to support in this particular situation.
Restaurants need customers to be successful, and al fresco dining helps encourage that. But if the presence of tables and chairs on sidewalks continues to be overwhelmingly bothersome, it could end up causing more problems than it’s worth.