Shopping Center Business

MAY 2016

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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RESTAURANTS 332 • SHOPPING CENTER BUSINESS • May 2016 Chang with Momofuku, Daniel Boulud's DBGB, and Fig & Olive, which is based in New York. That's really what's going on here now. SCB: What kind of attention or numbers are these restaurants doing to keep them attracted? Do they just blow the doors off when they open their doors in Washing- ton, D.C.? Papadopoulos: Pretty much, for the most part. They still have to put out a good product — and all of these guys are doing a very good job. The successful restaurants in D.C. are doing anywhere from $800 to $1,000 per square foot. Some are doing a little bit better, but that's generally the sales. SCB: Do you see any concepts starting out in food halls like Union Market and growing from there? Papadopoulos: There are plenty of guys who started out with their food stalls and some of them have left and expanded into full service restaurants. SCB: Food is a huge trend nationally. You're seeing it not only in urban areas, but also in suburban areas, in shopping centers and in urban projects — food has become the anchor. How do you see that from your vantage point as the one who is cutting the deals? How aggressive are landlords with food deals and how im- portant are they? Papadopoulos: Taking it to D.C., City Center is a great example of that. The developer's main goal for the retail was specifically for the restaurants. They were more concerned about getting the right concepts there as opposed to getting top dollar on rent. That's the attitude a lot of developers have taken with signature mixed-use projects because restaurants are really the anchors of these projects now. Of course, you have some landlords and all they're concerned about is rent. The City Center project — a few other new projects around town — want the newest, the coolest and the hippest restaurants, and that will set a trend for the rest of the project, whether it's more retail or residential or office. The restaurants can really create a nice project on the floors above. They help attract the right office tenants, and you can get better rents for residential or higher prices if they're sell- ing units. SCB: What are some of the most popular restaurants in D.C.? Papadopoulos: Right now, the hottest thing in town is Momofuku operated by David Chang, who is based in New York. He's also got Milk Bar. That's the hottest concept in town. Rose's Luxury, which is another one of our clients, that's proba- bly the hardest restaurant to get a seat at right now. It's a small restaurant on Cap- itol Hill that was voted best new restau- rant in America two years ago by Esquire magazine. They don't take reservations. People start lining up at 3 p.m. to get a table. That'll go away eventually, because it always does, but right now that's prob- ably the hottest ticket in town. SCB: Are you seeing any overall trends in restaurants or food, like healthier eating or farm-to-table? Is all of that playing into the food movement you're seeing? Papadopoulos: Absolutely. It's funny; I did the first Outback Steakhouses when they expanded from Florida. They had a few restaurants in Florida, and one of the founders came to Washington in the late 1980s. We used to go to meetings with landlords, and the landlords would say, 'Are you guys crazy? Opening up steak- house restaurants? People want to eat healthy.' And their answer was, 'People want to eat healthy when they're at home, but when they go out, they don't care.' That's changed now. People want to eat healthy when they go out, and there's a lot more farm-to-table and organic restau- rants. Millennials want to eat healthy, and those are your biggest customers in the city right now. SCB: One of the questions we get from our roundtables over and over is, 'do peo- ple even eat at home anymore?' There are so many restaurants. Has D.C. become a restaurant town where everybody goes out to eat a lot of the time? Papadopoulos: I would say in almost every age bracket now, people are eating dinner out three or four nights per week. SCB: What kind of space is available for restaurants that are looking in and around Washington, D.C.? Papadopoulos: Right now, in D.C., space is very tight. There are some proj- ects that are starting development with availability about 24 months from now, but actual space that is available today in the city, there's only a handful of decent spaces. It's a very tight market. SCB: What expectations should land- lords have with some of these restaurant groups? Are there any misconceptions in dealing with chef-driven concepts? Papadopoulos: A big misconception that a lot of landlords have — and the public in general — is that the restaurant business is making a lot of money. While restaurants look busy, they may not be making as much money as everybody thinks. There's a lot of cost involved and landlords really need to consider that. Restaurants have their formulas; food cost has to be a certain percentage of sales, rent has to be a certain percent of the sales. Everything has to fall into that formula for a restaurant to be successful. SCB: When you cut a deal with a restau- rant, should a landlord break out the restaurant's books and go through them? What do sophisticated landlords do when they're negotiating with an upstart restaurant? Papadopoulos: Sophisticated landlords should ask the tenant — if it's a start-up or a guy who has a couple of restaurants that's looking to expand — for a business plan. They really need to get a business plan from the tenant where he lays ev- erything out as far as what his costs are, what his projected sales are, and a range of numbers that project sales. The land- lord should really understand what rent

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