Chuck Sudo | Bisnow Chicago | January 25, 2018
When John Manion opened La Sirena Clandestina on Fulton Market in 2012, the one thing he was certain about in the lease was the rent was perfect for a chef opening his first restaurant. “I was only a cook before. I’ve learned all of this on the fly,” Manion said. Six years ago, chefs like Manion looking to strike out on their own could choose from an array of small restaurant storefronts in the area.
Manion took over an existing lease on the La Sirena space at a time when the Fulton-Randolph Market District was home to a handful of notable restaurants, and rents in the area topped out in the $20/SF range. Today, rents in the area are nearly three times that, and now that Fulton-Randolph has emerged as Chicago’s hottest restaurant district, it is dominated by a handful of larger restaurant groups. The rents are one reason smaller restaurants are struggling to stay in business, and why even proven restaurateurs are seeking space outside of the neighborhood.
An Explosion Of Rent Growth
Asking rents for Fulton-Randolph restaurant space last year averaged between $40/SF and $50/SF, according to research from Quantum Real Estate Advisors. Some landlords are asking for — and receiving — $100/SF rents. With those rates, most of the new restaurants entering the market have been high-profile openings from established restaurant groups like Boka Restaurant Group (Girl & the Goat, Momotaro, Swift & Sons), Hogsalt Hospitality (Au Cheval, Maude’s Liquor Bar), One-Off Hospitality (Blackbird, Avec, The Publican), Heisler Hospitality (Lone Wolf, Bad Hunter) and Rick Bayless’ Lena Brava and Cruz Blanca Brewery & Taqueria.
In addition to increased asking rents, startup costs in the restaurant industry are high, rising property values have restaurants on the hook for more property taxes, and restaurants are paying higher wages and benefits while contending with a shrinking labor pool for job openings. This confluence of factors is forcing new and old restaurants out of business. Perez Mexican Restaurant, one of the oldest restaurants in Fulton-Randolph, closed its doors in September after 33 years on Randolph Street. De Cero shuttered its doors after 15 years in business.