April 8, 2015

Increased Competition For Prime Spots, Coupled With Ready Capital, Encouraging Restauranteurs to Specify “Best Available” Spaces Including First Generation Locations


Chuck E. Cheese 18,000 square foot lease in combined Fashion Bug and Tuesday Morning spaces at North Plaza is example of recent trend in local marketplace

American consumers, with an increasingly hectic lifestyle, are cooking meals at home less frequently and eating out more often. This trend coincides with the dramatic rise in restaurant openings, particularly throughout the Baltimore-Washington, D.C. metropolitan region which, in turn, has created greater competition among all restaurant categories for prime locations with attractive and growing demographics. With added pressure on restaurant real estate departments to uncover the “best possible locations” to support growth and “out-position all competitors,” second-generation restaurant spaces are no longer the first priority. In this environment, nearly every option is being considered, particularly with the presence of available capital to support expensive tenant build-out costs.

“In the early days of the economic recovery, the only demand we saw from restaurants was for second-generation restaurant space. Capital was scarce. Debt was hard to come by. As a result, very few restaurants were spending the money to expand like they had before the downturn. But in the last few years, restaurant leases have become one of the most common deal types,” explained David Donato, Vice President – Commercial Division at Continental Realty Corporation. “Today, restaurants are becoming more creative and looking at additional options to fulfill their real estate requirements. The location of the space is clearly the number one priority in the search, and this reflects every decision.”

Local restaurant real estate searches include:

Noodles& Company chooses former Mattress Warehouse space at Park Plaza

Edgar Cepuritis, now Vice President – Real Estate at Café Zupas, recommended a former Mattress Warehouse space at Park Plaza in Severna Park, as the location for a new Noodles & Company fast-casual restaurant. “Our interest is in getting the very best real estate – period,” Cepuritis stated, “whether that be second generation space, new construction or turning existing retail space into restaurant space. Our goal is to out-position not just our direct competitors, but every restaurant in the quick-serve category.

“Certain landlords are now willing to help pay for build-out costs, which is making decisions easier in some cases. This is a function of the rent escalation that developers and owners are realizing after, by way of example, not receiving top rents from an existing tenant that initially signed their lease ten or fifteen years ago. The lease with the incoming restaurant has elevated to a market rate, and the owner has renewed interest in investing capital, Cepuritis added.”

CuVino leases former Family Medicine Associates location at Padonia Village

The owners of CuVino trattoria• pizza •enoteca – brothers Ralph and Angelo DiBiasi – took a realistic approach to their real estate search with the realization that it would be nearly impossible to retrofit an existing restaurant into the concept they had in mind. “Going into a former restaurant location severely limits you,” said Ralph DiBiasi as he was overseeing construction activity on his 4539 square footspace within Padonia Village in Timonium.

“We were prepared to invest in our build-out plan and thought it made the most sense to start from scratch and not worry about existing kitchen facilities that might sway our thinking. Simply dusting off the cobwebs and calling the space a new restaurant seemed a bit disingenuous. We have a clean slate and are able to execute our plan, which we believe will be central to our success,” DiBiasi added.

Nalley Fresh falls in love with The Can Company

“Restaurants will beg, borrow and steal to find the ideal location,” explained Patrick A.M. Miller, who handles restaurant leasing activities in his role as Principal for KLNB Retail. “Opening a new restaurant within an extremely old building, in a space that previously was the seating area of a larger restaurant, with no in-place kitchen or plumbing fixtures, proved a challenge, but was one that was worth it to the salad and wrap shop.

“In addition to the installation of new plumbing systems, the space required grease traps and sophisticated ventilation programs to prevent any smell of cooking permeating the office spaces. This was the price of securing the attention of a dynamic day-time business audience and a healthy and affluent surrounding neighborhood.”

Chuck E. Cheese takes combined Fashion Bug/Tuesday Morning space

Accessing more than 300,000 consumers within a five-mile radius was a strong draw for Chuck E. Cheese and led the combination restaurant and children’s entertainment center to select the combined Fashion Bug and Tuesday Morning spaces at North Plaza in Parkville. The restaurant’s footprint of approximately 20,000 square feet of space places it in competition with virtually every retail category but, given its extensive build-out, the concept rarely saves any cost with the assumption of a former restaurant space.