We were unhappy about last week’s news that Katz’s deli has fallen on hard times. Amidst the recent bankruptcy, Austin’s Katz’s Deli is now certain to be moving. Our sources say the landlord wants them out, and the famous restaurant could vacate as soon as August.
According to the ABJ article, Katz said agreeing to his lease terms was his “biggest mistake.” DAB is being told that the current landlord is asking $42 per foot + ~$12NNN for approximately 6,000 square feet. It’s gotta be hard to make a living paying $27,000 per month in rent while selling sammiches in Austin, Texas!
The restaurant chain may be down, but not out. Even with the financial troubles, it is hard to imagine there isn’t a landlord out there that could benefit from the Katz’s brand cache. We’re eager to find out where they will be moving to.
(That gigantic location at Cesar Chavez and Guadalupe)
Would 2nd street be a viable location?
As a fellow long time Austin retailer it is, and will continue to be hard, for Austin independent businesses to compete with the rents that new development bring about. If you noticed, most of the second street retailers have turned over and I am sure some serious money was lost by these early pioneers in the district. If the adage, “if you can’t make the escalating rent you should not be in business” prevails…we will have office uses and national merchants with deep pockets who can pool their risk. Our local flavor will certainly be diminished downtown. A few of these merchants will locate out of the high rent districts, out on the fringe – but the flavor that THEY BROUGHT to our downtown – our tourist engine – will be diluted.
While I am sure there is more to this story and the business decisions that precipitated all of this…it is too bad to see this happen. It’s a tale that is told over and over, in city after city, unless you own your building…your days are numbered if your city is thriving. The landlords will price a tenant out, put a sign in the window, let the dust and graffiti settle on the building for years rather than lease at a fair rather than exorbitant rate. We will have another abandoned corner for who knows how long.
Solution?
…
Solution #1 is more supply. Keeps prices down over the baseline, despite the implications to the contrary.
Solution #2 is to own your space. Solves all of these problems pretty nicely.
The worst ‘solution’ of all is to try to assert a sort of squatters’ rights, as Las Manitas did.
How does that rent compare for that location? Just curious if it’s really high, and if so, will that be a major obstacle in getting something else to replace them….
This is really high. I admire their hubris, but I wouldn’t be the sucker that pays for it.
The W Hotel is asking $40psf in base rent. You can rent space on 2nd Street for $25psf base rent.
$42/foot !!??! That’s highway robbery! I’m a commercial agent and that seems way out of whack in that area. Like double maybe. It’s one thing for the W to charge that much for some new fancy- pants retail, but for an established restaurant like Katz’s that it is just not going to work. If a restaurant is going to survive and be healthy they need to be paying about 6-9% of their gross revenue in rent. That means that Katz’s would have been doing 300,000/ month. That’s a lot of sandwiches.
I suppose we don’t know the details of what was really going on behind the scenes, so it is conceivable that there is much more to the story. I’ve been on both sides of this equation, so I hate to be judging someone without all the facts. Hopefully the landlord will replace it with someone of quality. Or maybe they’ll get an applebees. . .