When the COVID-19 outbreak first erupted, many nonessential businesses were forced to shutter. And while restaurants were never given the directive to close completely, they were barred from welcoming diners early on in the pandemic. And then, for a period of time, they were forced to limit capacity once in-person dining was back on the table.
Not surprisingly, many restaurants adapted by expanding their outdoor setups. In suburban areas, this was often accomplished by repurposing patio space or cutting into parking lots.
But for city eateries, outdoor service has been much more of a challenge due to a general lack of space. Many city restaurants don't so much as offer on-site parking for staff. And so seating diners outdoors has, for many, meant expanding onto sidewalks.
That, however, has been a mixed bag. And in cities like New York, it's actually become a significant problem.
When there's just no room
In September 2020, New York made its outdoor dining program permanent. The program allows restaurants to utilize sidewalk space to set up tables and accommodate diners who want their meals served outdoors.
Though restaurants are allowed to offer indoor dining to patrons, many customers remain hesitant to dine inside due to COVID-19 concerns. This means outdoor dining is, for many restaurants, an opportunity to secure more customers -- and revenue.
But not everyone is a fan of restaurants usurping sidewalk space. In fact, New York City residents in particular have complained that outdoor dining results in undue crowding. And for those who reside in apartments above restaurants, it can lead to excessive late-night noise.
Outdoor dining in cities like New York also opens the door to compliance issues. A recent survey of 418 city restaurants found that 93% were in violation of at least one outdoor dining guideline, according to a report by the office of City Council speaker Corey Johnson.
The problem has gotten so bad that some residents are suing the city in an effort to have outdoor dining overturned. But if that happens, it could be disastrous for those restaurants that have come to rely on outdoor dining to attract patrons.
Should real estate investors be worried?
Outdoor dining is a complicated issue. If it's kept up, it could prompt some residents to move elsewhere, leaving apartment landlords with vacancies to fill.
The bigger issue, however, is the impact on local businesses. If crowded, impassable streets and inevitable food waste turn otherwise clean, open blocks into cluttered, dirty ones, nonrestaurant businesses might end up losing patrons. And if they opt to leave, it'll cause problems for commercial landlords, not to mention potentially erode property values -- something that tends to happen when area businesses shutter in short order.
Then again, restaurant closures are also bad for neighborhoods and could impact the value of residential and commercial properties alike. And so from a real estate investing standpoint, it's hard to know who to root for in this particular situation.
Restaurants need customers to thrive, and outdoor dining helps promote that. But if the presence of tables and chairs on sidewalks continues to be overwhelmingly disruptive, it could end up causing more problems than it's worth.