CREJ

February 2015 — Retail Properties Quarterly —

Page 19

ast year, Denver welcomed

approximately 300 new restau-

rants into the Denver metro

area, and about 200, or maybe

even more, are expected to

open their kitchens in 2015. Needless

to say, metro area diners have plenty

of cuisines, neighborhoods and price

points fromwhich to choose. And

before you begin to feel “stuffed,” there

are a lot of exciting new culinary ideas,

ventures and trends that will keep you

coming back for more.

One of the more interesting things

occurring with small, chef-driven

restaurants is the preference toward

smaller spaces.These independents

are more than happy to locate in a very

intimate setting (2,000 to 4,000 square

feet) and provide superior service and

unique recipes to smaller groups of

patrons. In addition to a small space,

they are increasingly seeking locations

that are tucked-away, and sometimes

challenging to find, as long as they’re in

an urban setting. For these rebel chefs,

being somewhat of a mystery – in an

offbeat location – adds to the aura of

their image, enhances the custom-

ers’ experience and, some might say,

makes themmore in demand.

Perhaps people enjoy a sense of dis-

covery and, for many serious foodies,

the more unusual the trek to get a great

meal, the more fun. As a result, small

restauranteurs are on the hunt for the

proverbial “hole-in-the-wall.” Some of

their target areas in Denver include old,

traditional neighborhoods where small

vintage buildings have been renovated

(and have been home to the neighbor-

hood tailor, barber or bar for countless

years). Another surprising location that

is in high demand is in the city’s old,

industrial zones (River North is a prime

example), where a

restaurant might

set up shop next to

a cement plant or a

secluded art gallery.

The many Denver

neighborhoods that

haven’t yet reached

their full potential

in regard to develop-

ment (Jefferson Park

and Five Points are

two examples) also

are beginning to get

a lot of attention

from chefs with a “build it and they will

come” approach.

The fundamental “rules of retail”

have shifted for these culinary entre-

preneurs.They do not require locations

with the most auto and pedestrian traf-

fic or highest incomes. And if they pro-

vide value, quality and are in step with

contemporary trends and décor, people

will find them. As an added benefit to

their willingness to alter the rules of

the game, they can obtain more afford-

able lease rates at the lesser-known

commercial addresses that will help

them to stay in the game long term.

This trend might concern the land-

lords of larger metro-area projects,

but never fear, as many larger, multi-

unit operators’ restaurants still want

demand-only real estate.These restau-

rants understand that their customer

base knows and appreciates their qual-

ity, consistency and service level, and

will keep coming back for good food

and added convenience. It’s for this

reason that the franchises want to be

located in shopping malls and centers,

along busy streets and in areas with

great visibility.They often want large

footprints (4,500 to 7,000 sf) so they can

generate substantial volume and return

on their investment.

Major, well-funded restaurant groups,

particularly from other markets, are

willing to pay top dollar for A loca-

tions, provided that they include the

complete restaurant infrastructure

and $100 per sf toward the build-out

of the restaurant.These contributions

often are in excess for larger restaurant

groups.Their brand and reputation are

already well known, highly respected

and reliable for giving their customers

exactly the experience they want.The

landlords who can accommodate this

formula for success likely will enjoy

the value of having a strong restaurant-

anchor tenant or tenants on their prop-

erty for a long time.

In between the indie chefs and the

large sit-down restaurants, there are

numerous fast-casual restaurants,

which continue to expand throughout

the metro area. Customer favorites,

such as Smashburger, Qdoba, Panera

Bread, Modmarket, Potbelly, Noodles &

Co., Einstein Bros., Hop Doddy, Chipotle

and Dunkin’ Donuts, are competing for

new locations across the Front Range.

They also have “prime” site criteria,

and generally require 2,400 to 3,000 sf

in order to serve their customers. In

addition to new locations, this category

of restaurants is actively updating the

décor and design of their space.They

want to appeal to a younger contempo-

rary customer base, in addition to their

base demographic, and stand apart

from the competition.

If you’re building up an appetite, the

metro area’s restaurant scene is as

active as it has ever been and we are

the beneficiaries.

Denver’s restaurants have an appetite for variety

Restaurant Update

Kelly Greene

President, Urban

Legend Retail

Group, Denver

The preference for chef-driven restaurants is toward smaller spaces.