Greedy Landlord in Leslieville?
The recent news that Red Rocket Cafe (Queen East and Vancouver St) is closing their Leslieville shop after many years in business has irked local Coffee enthusiasts. The word on the street is that their Landlord is doubling their rent which would result in lower than expected profits for the Cafe Owners.
The question is; Is this an aggressive landlord or a business not willing to adapt to market demand along an increasingly popular stretch of Queen Street?
Fans of the business via Facebook posts, blog entries, and Twitter rants have used words like “Greedy”, “Inconsiderate”, “Savage”, “Unethical”, and having “No Regard for the Community” when describing the landlord while showing unwavering support for the Owners of Red Rocket Cafe.
Red Rocket Cafe opened up shop in Leslieville over 4 years ago named after the streetcar Yard across the street. They offer a wide variety of fair trade, organic drip, and espresso-based coffee drinks.
Prime Leslieville commercial rents have been steadily increasing year over year since 2000. Businesses should expect to pay between $27-35/sqft annually for average Queen St frontage and up to $50/sqft for prime corner retail spot similar to the Great Canadian Pie Company site. The Red Rocket’s location was a bit of a ‘no-mans land’ and has slowly been annexed in to the cool, hip area as many local events like the Leslieville Farmers Market and cool restaurants like Queen Margarita Pizza have stretched the boundaries of what was traditionally known as the trendy part of Leslieville. I would imagine the Red Rocket Cafe started paying $20-25/sqft per annum and that is now being set at a more realistic $40-50/sqft per annum. Again, these are just assumptions based on typical market costs.
It’s sad to see the Red Rocket Cafe close shop in Leslieville however we think the reaction shouldn’t be so one-sided. Let’s remember that the Owners are CHOOSING to move to another location (1364 Danforth Avenue.) not being forced out, they have a successful downtown location and they’ve simply made a business decision that the Danforth location would be more profitable. Just as the landlord made a business decision, the Cafe owners have made their own.
Property owners have a right to charge market prices to businesses. The fact that the landlord is holding their ground means they won’t have trouble leasing the property to another (hopefully exciting) business. Red Rocket like the landlord is motivated by profits and made the decision that their customers wouldn’t absorb the increased rents in product prices. For those willing to travel Red Rocket has a 2nd location behind Jarvis Collegiate (East of Wellesley St. on Jarvis).
9 Responses to “Greedy Landlord in Leslieville?”
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How is that any different than the developments at Carlaw & Dundas? 12 floors, directly in the face of current residents? Even worse, it’s sold and they run away. The problem isn’t theirs mere months after the place is fully purchased. They offload the condo corporation, and they move onto their next profitable location.
Hi Rico,
I guess the common denominator is business. Your comment refers to the standard business model of any developer. Buy land, push zoning limits, promote, sell, build, sell some more, city approves, condo registers and they move on.
In the end, the developer is a business owner and as with any business needs to make a profit to stay viable. Unit owners profit as well (appreciation and rental income) and the neighbourhood is improved by revitalizing vacant lots and/or older buildings.
Also important to note that Leslieville is quite close to the Downtown Core and many other amazing amenities including the beach, Lake Shore path, Danforth and many other fantastic local amenities resulting in overwhelming demand for housing! Not everyone can afford a freehold home in the area and the only way to fulfill the demand is to build more affordable condos for both living and for investors to fill a void in the rental market.
All the best,
Ara Mamourian
ara@springrealty.ca
416-434-1511
The problem with pushing the rental rates up is that it’s ultimately only testing the waters to see what you can get away with. In the meantime you sacrifice good tenants and the only ones left who can afford the space are large faceless corporations. You lose the soul of the neighbourhood in the process. Like so many streets like Queen west. You also assume that Red Rocket Cafe can still make money at double the rent. A good profit in the restaurant business is 5 cents to the dollar. Doubling the rent overnight means no profit so really they have been forced out. Would you stay and run the business if it cost you money every month out of your pocket? Rent has to go up gradually to sustain the business and tenants or else the landlord IS greedy.
Thanks Steve,
There’s a fair amount of risk being taken by the landlord to remove a reliable tenant and try to attract a new reliable tenant at a much higher rate of lease. It is interesting how much protection there is for housing tenants from what may seem like ‘unreasonable’ rent increases versus commercial tenants. The large faceless corporation argument is one that could be debated for days – ultimately the consumers decide through their patronage which businesses will thrive and which will fail. Economies of scale allow corporations like Starbucks to buy supplies on a massive scale lowering their per unit costs so they can absorb higher rents than then a small business like Red Rocket could afford. We ourselves are a small start up business trying to compete in a market place with massive franchises. We remain hopeful that the little guys can remain competitive by offering unique products/services and value in the gaps the big guys create through their overhead and rigid structure.
Considering the location now sits empty with a “for lease” sign in the window, it looks like the landlord (and sadly, the Queen East community) lost, with the cafe is up and running in their new Danforth home.
Since the new asking price is unprecedented for that part of Queen St the landlord likely understands that the space would take longer to occupy. However once a new tenant signs on at the significantly higher asking price (or close to it) for a minimum of 5 yrs a few months of vacancy would have been well worth it for the Landlord.
Of course its not ideal to have vacancies along a popular retail strip but times are changing and businesses have to adapt to new market conditions. The best way for a business to avoid this type of situation is to own the space they occupy at the earliest opportunity. Look at what’s happening with the Real Jerk at Queen and Broadview. After 20+ years in business their lease is being terminated. Property ownership is key in achieving long term success in business.
I am currently seeking a tenant at my storefront at 993 Queen St E. My Agent and I settled on 28/sq ft for this fully licensed 1850 sq ft space (formerly Toast on Queen) I made a conscious decision to rent the space at a reasonable rate for the area precisely because I was looking to attract a ‘mom & pop’ business. As a landlord, I have always opted for more stability over the long-term over higher rents. In my view, what I lose in profit over time with a lower rent is returned 2-fold by the stability in my space, and it makes me feel good to provide a safe-haven for small business.
You do have a large space there and would make a fantastic bar/restaurant but at $4316/mth plus a few thousand more per month for taxes, maintenance, and insurance there aren’t too many small mom and pop type outfits that can handle that sort of rent.
You’ve had a number of proposals for the space haven’t you? What seems to be the main issue with getting the deal firmed up? Curious to know as you’ve got a great location and would be great to see it come to life.
The main issue always seemed to be getting financing. The winds had shifted on that front. Many of the backers just didn’t believe in the neighborhood. I also was not interested in the numerous franchises who were jonesing for the space. I do finally have a signed lease with two very experienced restauranteurs, who are putting up their own money to make it happen. Should be open soon!