THERE it was again. “Great space — perfect for you!” Stephen Starr’s BlackBerry was buzzing with a message promoting another tantalizing opportunity. “Brokers in New York and Philly have come to know me as the space junkie,” said Mr. Starr, who is the founder of the Starr Restaurant Organization, which owns 19 restaurants in Philadelphia, New York and Atlantic City. “I get e-mails every day.”
Mr. Starr’s investments have often started with an inspiring space. That’s how he came to have two major restaurants in Manhattan, a little more than a block apart.
In the spring of 2004, he had just closed the deal for Morimoto, a New York version of his Philadelphia restaurant named for Masaharu Morimoto, the Japanese chef at its helm, when the landlord suggested that he look at another space nearby.
Mr. Starr didn’t want to open another restaurant so soon, but when he saw the space — a soaring 16,000-square-foot former Nabisco factory on Ninth Avenue, at 16th Street in the Chelsea neighborhood — he was hooked. Two years and about $15 million later, it would house Buddakan, a New York outpost of Mr. Starr’s Asian-fusion restaurant, also in Philadelphia.
“There are great deals out there; the problem is, banks won’t lend you any money,” Mr. Starr said, referring to the continuing credit crisis. “It’s torturous.”
A lot of restaurateurs and the brokers that cater to them feel the same way. With the economy in a tailspin, restaurants across the country are feeling the pinch, but perhaps nowhere more so than in Manhattan, where the cost of opening and operating a restaurant has soared over the last several years. (Some restaurant neighborhoods that barely existed only a decade ago, such as the meatpacking district, now command rents of $300 to $400 a square foot, according to Jeffrey D. Roseman, an executive vice president of Newmark Knight Frank Retail.)
Even over the holiday season — typically the busiest and most profitable time of year for restaurants — business remained weak, as Wall Street firms and other companies canceled or curtailed holiday parties. High-profile restaurants across the city reported that holiday business was off 20 to 40 percent from the previous year, according to the New York City chapter of the New York State Restaurant Association.
“The collapse of Wall Street in October was the worst possible time for the restaurant industry,” said Chris Cannon, the owner of Alto and Convivio, both in Midtown Manhattan.
Sales at the high-end Alto declined over the last three months from the previous year, Mr. Cannon said, but business at his other restaurant is booming after it reopened last summer with a new name (Convivio, changed from L’Impero) a lower-priced menu and glowing reviews. Averaging the two, he said, he’s even with last year’s performance.
Mr. Starr, meanwhile, said business at his Manhattan restaurants was solid until December, when sales fell 5 to 9 percent. Now, he said, “We’re all concerned about this quarter.”
Industry watchers are anticipating a shakeout. Mr. Cannon, for one, predicts that 10 to 15 percent of New York’s high-profile restaurants will close in the coming months. “It’s tough,” he said. “Everybody’s talking to their landlord.”
Last month, Stephen Hanson, the president and founder of the restaurant group B. R. Guest Restaurants, closed Fiamma, an Italian restaurant in SoHo, and Ruby Foo’s, an Asian-themed restaurant on the Upper West Side. The leases for both were scheduled to expire this spring. Fiamma will become a space for private parties and events.
Steven M. Kamali, the principal of Steven Kamali Hospitality, a brokerage and consulting firm, says his restaurant listings — many of them struggling restaurants that still have time left on their leases, a situation he once described as signaling “imminent death” — have surged by 70 percent over the last 90 days. His current roster of 50 or so listings include restaurants in New York City and a few on the East End of Long Island. Mostly, he says, it’s smaller businesses with single, standalone restaurants that are in trouble.