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REAL ESTATE
Does New York Need Another Food Hub?
One thing anyone manufacturing food in New York City knows is that “real estate is crazy,” says Marisa Wu, the founder of Brooklyn-based taffy maker Salty Road.
Crazy real estate prices helped drive the city’s Economic Development Corporation to spend $15 million to turn a small piece of the 4.1 million-square-foot Brooklyn Army Terminal on the Sunset Park waterfront into a new hub for foodmaking. The 55,000-square-foot building has now attracted three tenants, with room for a half dozen more, to what the city touts as affordable, code-compliant space ideal for food manufacturing.
With rents between $22 and $24 a foot, compared with some industrial space on the market now f or $14 to $18 a foot, according to online listing service Loopnet.com, the price is well above what many foodmakers are paying for leases they signed in the past several years.
Julie Stern, the city’s point person at EDC for the Army Terminal says the spaces offer intangible benefits that more than make up for the market rates.‘Rent is just one component,” Stern said in an interview. “Sure, New York City is expensive from a real estate perspective, but when you think about access to skilled labor and markets and transportation, the all-in costs are lower.
”Smaller spaces, like the 2,000-square-foot floorplates available at the Army Terminal are hard to find on the open market, and the city doesn’t charge real estate tax at the Terminal and offers bulk-prices on electricity and gas, she said. Besides, says Stern, she’s got to work with a “double bottom-line”: help create jobs or keep existing jobs in New York, and ensure city property generates a profit.
Using the Army Terminal’s contractors, and the EDC’s assistance to secure city, state and federal permits made the price worthwhile for Michael Marino and Jorge Moret, whose City Saucery cooks and bottles tomato sauces devised by Michael’s mother, Carolina, a native of Calabria, Italy, and an alumna of Staten Island’s Enoteca Maria, a restaurant staffed by a rotating cast of “international grandmothers.”
Like the other tenants at the Army Terminal, City Saucery got some givebacks including a grace period and a break in buildout costs to entice them into the space. The pair had outgrown a shared kitchen at Long Island City’s Entrepreneur Space, and now employ three full-time staff, and hope to ramp up to 5,000 jars a week, with a piston-filler machine. “It’s a little difficult to scale up and still share a kitchen space with 80 other producers,” said Marino.
Masaki and Yukimi Momose say the space works well for them. Momose got his start in New York in 2010, while visiting his sister in Manhattan’s Murray Hill neighborhood. Noticing a weekly greenmarket across the street, he got permission to sell salad dressing next to a vegetable stand. “The first day, I sold only two bottles,” he recalled.
Speaking little English, but aware he needed a gimmick to jumpstart sales, Momose put up a sign to entice buyers. “It said ‘If you teach me one new word of English, I give you $1 off.’ Kids came and they brought their parents, and I sold 18 bottles.” He collected 400 words, and says his favorite was “entrepreneur.”
While his wife worked as a chef in a sushi restaurant, Momose rented shared kitchen space in Sunset Park, Brooklyn, making and bottling Momo Dressing, which he now sells at markets including Whole Foods across the New York area. Momo Dressing moved into the Army Terminal a year ago, as its first tenant, attracted by the location, with views of New York Harbor, and the option of room to expand his growing business.
Despite the convenience of a tailor-made factory space, Salty Road’s Wu says she’s struggling to produce in New York. “There are so many challenges to manufacturing in New York City,” she said, citing endless regulations, the high cost of living, which means paying higher wages to keep her staff, and the very high cost of real estate, including a standard practice on many city commercial leases of adding 25 percent to the square footage to cover the cost of common areas.
Strapping a pizza-sized lump of taffy base onto a stretching machine, Wu says she looked at manufacturing upstate, but for now, she says “the reason I am doing this is because I love New York City and I want to live here.” She says with all the added costs of doing business in New York, she’s given her firm five years grow big enough to make it worth staying in the city. If not, she’s gone.“I’ll end the lease if we don’t reach that size.”
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STARTUP
3 Questions: Startup Kitchens
Kathrine Gregory is managing consultant at the Entrepreneur Space incubator in Long Island City, an industrial kitchen that has launched more than 600 food businesses, of which about 70 percent are still operating. Some 100 business use the kitchen each month.
Why do food startups come to your kitchen in Long Island City?
The entrepreneur space is a low cost way to prove your food concept. If you went out to rent your own kitchen and equip it, you could easily spend $100,000, and that’s before anybody sells anything. Somebody coming into the Entrepreneur Space would invest about $15-$20,000 plus your $1,000 security deposit. That's all. We want foodmakers to understand what they need to do to build a successful business. They come to us and say I have an idea, I have a recipe. And that's where the incubator is helpful - you can work with our counselors and we help you create a viable business. We don't have food scientists or trained chefs, and to be clear, we offer advice, but we do not invest money in food businesses. But we do offer mentoring and advice.
How does a foodmaker know when it’s time to graduate to their own space?
There is no one path; we will work with you to find the best path for you. Once you’ve proven your concept and generated sufficient revenue, now you have the basis to rent your own space and grow larger. There is no number of years, but if somebody told me they reached $100,000 in sales I’d say maybe they can go out on their own. More than the money is the usage - if you are using the kitchen more than 3 shifts per week, then you really need your own space. We work with you to determine what is the right time for you to leave.
What’s your advice to someone who wants to start a food business?
The first thing is to refine your recipe and test it out on friends and family. Then try to get impartial people judging it. Donate product to a bake sale, and stand by your table and talk to people as they are buying your product. To be successful, people have to pay for your product. These are strangers—your friends and family will lie to you. Then you need to do some comparisons: what else is out in market that would be your competition? Then you need to actually price out your recipe, and the price you would have to charge. The best way is go to Costco and price a pound of flour, price packaging. You may have the best product and people absolutely love it, but if you can't sell it at the price you need to make a profit, don't do it.
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BY THE NUMBERS
269
With 269 beermakers in 2016, New York State ranks fourth in the nation for craft breweries, behind California, Colorado and Oregon. That's up 61 new breweries since 2015, according to the Brewers Association. New York ranks ninth in beer production, with 1,000,785 barrels. In 2014, the industry generated economic impact of $2.9 billion across the state.
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NEWS BITES
Ever wondered how that banana gets to your corner fruit stand or supermarket? The New York Times' Annie Correal takes you from boat to bodega....Small foodmakers can tap their fan base for cash with a new app that lets foodies pre-order from their favorite businesses....Traces of pesticide Roundup found in Ben & Jerry's ice cream, raising broad questions about food safety....Rap icon Drake invests in Brooklyn's Matchabar tea maker....Silicon Valley imitation meat startup raises $75M... NY Post columnist describes life as a lunch sherpa....Grubhub continues rolling up its rivals with $287.5 million cash bid for Yelp's Eat24....Floating farm barge docks in South Bronx with free food for neighbors....Grocery delivery service Boxed buys its wares at Costco, then bumps up the price....And for a little light relief, catch these misheard food lyrics from pop songs.
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