SANTA MONICA, CA—Related California has signedthree new restaurant leases at OceanAvenue South, a $350 million luxury mixed-use developmenton Ocean Avenue. The new tenants include Joan's OnThird, Herringbone andeLOVate, all of which will open this summer. Thisis a significant selection of new restaurants and shows theincreasing demand for restaurants in retail-type spaces, especiallyin a market where the retail vacancy rates are already a low2.8%.

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“Restaurants are the most active category in retail right now. Iam seeing more demand from restaurateurs than I have seen in sevenor eight years,” Zachary Card, a broker atCBRE, tells GlobeSt.com. “It reminds me of theheyday in 2005 and 2006. During the recession, restaurants werereally one of the first categories to slow down—but it is back witha vengeance. The demand for restaurant space grossly outweighs thesupply and it has allowed us to be extremely selective on who wepartnered up with. In a mixed-use project, landlords look topartner with restaurants because it acts as an amenity base intheir project. There is nothing better than having phenomenalrestaurants on the ground floor of your mixed-use project.” Cardrepresented the landlord in the transaction along with his CBREcolleague Casey Jahn.

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Card didn't just pick any three food-service options for thisspace, however. The marketing team looked for chef-driven boutiqueand gourmet restaurants that serve the local community andtourists. “We wanted an eclectic blend of local, regional andnew-to-market restaurateurs. We think we have a phenomenal line-up,being mindful of overlap,” says Card. “We wanted each restaurant tobe a destination within themselves, and then complementary to theoverall restaurant programming, so it is really creating a newrestaurant row on Ocean Avenue between Colorado and Pico. This isreally the most significant grouping of restaurants to open upsince Santa Monica Place opened in 2010.”

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Ocean Avenue South welcomed its first tenants late last year, and has 158condo properties in two towers and a 160-unit affordable apartmentbuilding. The condos are currently 75% leased and the affordableunits are 100% leased. There is one remaining retail spaceavailable at the property. It is 2,980 square feet and adjacent toHerringbone. Card says that they have received ample interest forthe remaining space and are currently vetting tenants. They arehoping to sign either another food-service tenant or aservice-retail tenant, like a bank branch or fitness center, to thespace. Joan's On Third opens next week, while Herringbone will open in July andeLOVate will open in August.

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As Card mentioned, owners of mixed-use projects preferrestaurants because they serve as an instant amenity. However, someshopping center landlords are also turning torestaurants—everything from fast-casual chains to fine dining—to serve as anchortenants in shopping areas because the retail type drives traffic tothe center.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.