Restaurateur says high rents hurting downtown Vancouver's restaurant culture
Credit to Author: Susan Lazaruk| Date: Thu, 27 Feb 2020 15:00:56 +0000
A Vancouver restaurateur who moved his Italian Kitchen restaurant when its rent tripled to $100,000 a month isn’t surprised to learn almost half of restaurants in the downtown core close in the first three years.
He says it’s bad news for the downtown dining scene.
The finding that 43 per cent of new restaurants fail was in a report released Thursday by the Downtown Vancouver Business Improvement Association. It looked at food and beverage retail trends on and around Granville Street, the financial district and Coal Harbour but not including Gastown, the West End and Robson Street west of Burrard Street.
“The game is over for restaurants in downtown Vancouver,” said Emad Yacoub, owner of the Glowbal Restaurant Group, which owns Black+Blue, the Roof, Nosh and Italian Kitchen. “The cost to operate downtown has completely wiped out mom and pop restaurants. The selection of restaurants in the downtown has dropped by half.”
In addition to high rents, the “very competitive” sector requires lots of capital and is facing worker shortages because of housing affordability and barriers to work permits, as well as other rising costs, including the new provincial employer health tax, the association said. Restaurateurs earn “very thin margins between three and five per cent.”
That makes it impossible for independent restaurants to open downtown and is even sending large chains like Glowbal Restaurant Group looking instead to expand to Toronto, where margins are 10 to 12 per cent, said Yacoub.
“Here’s a simple example: At Black+Blue, a $55 steak is $75 in Toronto and the prices are like that across the board.” His theory is that because of high housing prices, Vancouverites don’t have the same disposable income, forcing down restaurant prices.
People no longer head to downtown Vancouver to try out an innovative new restaurant, and it has become a place where you only catch a bite before a concert or a game, and at a large chain.
About 2½ years ago, he closed his Italian Kitchen on Alberni Street when the $35,000 monthly rent almost tripled. He moved it to Burrard Street. There walk-in traffic is good, so the move was a success, but Yacoub is warning that food and beverage retailers are being pushed out by luxury retailers with deeper pockets.
“Between a restaurant and Prada, landlords are always going to choose Prada,” he said.
But restaurant closures mean fewer reasons for people to walk the block and shop in those luxury stores. Italian Kitchen used to bring 250,000 people a year to Alberni, he said.
He said once Amazon brings 6,000 workers to the refurbished post office building, that area will be flooded with restaurants, but they will all have to be 7,000 square feet or more to be profitable and “there will be no small boutique restaurants because only the big ones will be able to afford it.”
He said it’s even becoming difficult for larger chains to prosper because “casual service” options, including food trucks, can charge the same $16 for a sandwich as a full-service restaurant, without the same overhead, he said.
Meghan and Steve Clarke opened Tractor Foods in Kitsilano seven years and now operate eight restaurants, with another two coming. Meghan Clarke said food and beverage is “a tough business with lots of moving parts. It’s not for the faint of heart” because of labour and food costs and the cost of capital — opening a new Tractor Foods location takes about $1 million, labour and food costs.
But they’ve chosen to open four of them, including the Pender Street site that opened in December, in the downtown because it “is really the sweet spot for quick-service format,” she said.
Tractor’s expansion shows that “people really want clean food, real food” they can get quickly, she said. “Time is getting to be scarce” and people don’t have time for the traditional full-service restaurant.
Despite closures, the sector grows at 1.5 per cent a year because “vacant spaces were filled for the most part.”
The business association reported that coffee and tea was the top food and beverage category downtown, with 115 “active businesses” open in 2018, followed by Japanese and sushi restaurants with 66 outlets.