SANTA MONICA, CA—Related California has signed three new restaurant leases at Ocean Avenue South, a $350 million luxury mixed-use development on Ocean Avenue. The new tenants include Joan's On Third, Herringbone and eLOVate, all of which will open this summer. This is a significant selection of new restaurants and shows the increasing demand for restaurants in retail-type spaces, especially in a market where the retail vacancy rates are already a low 2.8%.

“Restaurants are the most active category in retail right now. I am seeing more demand from restaurateurs than I have seen in seven or eight years,” Zachary Card, a broker at CBRE, tells GlobeSt.com. “It reminds me of the heyday in 2005 and 2006. During the recession, restaurants were really one of the first categories to slow down—but it is back with a vengeance. The demand for restaurant space grossly outweighs the supply and it has allowed us to be extremely selective on who we partnered up with. In a mixed-use project, landlords look to partner with restaurants because it acts as an amenity base in their project. There is nothing better than having phenomenal restaurants on the ground floor of your mixed-use project.” Card represented the landlord in the transaction along with his CBRE colleague Casey Jahn.

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

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

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