SoHo landlords losing appetite for restaurants.

SoHo landlords there are losing their appetite for restaurants as fashionistas and artists swallow up prime space at rents that leave a sour taste for chefs.

"Buildings in Soho are mostly coops, and landlords are aware of the demand for space there, and they want to maximize their income," said Richard Hodos, principal of Madison Retail Group.

"Post 9/11, rents in Soho were averaging $150 per square foot. Now they have doubled up to $300 per square foot and it's forcing restaurants out of business."

Hodos represented fashion designer, Michael Kors, in leasing a 2,200 s/f space at 101 Prince Street that is currently Jerry's, an upscale diner owned by Jerry Joseph. It was a transaction that actually pained Hodos to make, because he said Jerry's one of his favorite restaurants, but he knew the diner could no longer afford the rent.

Anything north of Bloomingdale's is expensive. If you go one block south, rents get dramatically cheaper. Between Houston and Prince Street, and Prince and Spring Street is considered a top location and rents are $300 per square foot on the ground floor of the first block.

Faith Hope Consolo, chairman of the retail leasing and sales division at Prudential Douglas Elliman, said rents for restaurant owners tend to be raised by 20% from the asking price.

Hodos added, "Landlords in coop buildings don't really like renting out to eateries, because of complaints from tenants about odors, fear of grease traps in the plumbing or any other issue that can arise from having food around."

Ivan Hakimian, a senior broker with Itzhaki Properties who specializes in off market deals in Soho, agreed SoHo has been trasnformed by the influx of hip young things. "Old-time landlords who have owned their building for many years realize that the demand is so strong for possible development of condominiums or hotels, that they just get pushed out by new developers."

He predicted that, as soon as their affordable leases run out, the current tenants will not be able to afford the rents--unlike the line of fashion retailers waiting in the wings to move in.

According to Hodos, larger companies tend to have more staying power, and that's true whether they are restaurants or any retail store. For example Lure Fishbar, on 142 Mercer Street, is in a location that has street presence but because the restaurant is situated right underneath Prada, it can maintain a lower rent, because it has below grade presence. With the transformation of SoHo to a chic neighborhood frequented by celebrities, young couples and young developers, other types of retail now dominate the area. "It's been very sought after by national and international retailers and is now full of fashion, accessories, home furnishing and European art galleries," said Consolo.

The PDE retail boss said there has been a noticeable shift of restaurants into the Meatpacking district where more space is available and rents are substantially cheaper. Average rent in the Meatpacking District is $175-$225 per square foot--a less than half the average SoHo.

Those attributes have helped the neighborhood attract a host of new eateries. Fig & Olive, a Mediterranean restaurant, opened at 420 West 13th Street; STK, a steak house, opened at 26 Little West; Sascha, with two floors, a downstairs bistro-bar and an upstairs upscale dining room, opened at 55 Gansevoort; Del Posto, an Italian restaurant, opened on 85 Tenth Avenue; and The InnLW12, which serves pub-fare, opened at 7 Ninth.

Consolo predicts SoHo retail rents will continue their upward tract, increasing 10-12% before the end of this year, and dubbed the Meatpacking District the "up and coming restaurant capital" saying that, the more expensive Soho becomes, the better business is for its neighbor.

Few SoHo restaurateurs are as lucky as Cesare Bruni, owner of Boom, at 152 Spring Street, who said, "I found a decent landlord and we negotiated a decent price. My lease expires at the end of this year, but I'll be here for another ten years."