SAN DIEGO—With experiences being the hot, new retail category, consumers are drawn to shopping centers for their dining options, for which landlords are becoming quite competitive, CBRE VP Carrie Bobb tells GlobeSt.com. According to the company's latest research on the restaurant industry and its impact on the Southern California market, strong employment and increased tourism propelled the region forward. The restaurant resurgence in Southern California kept restaurant and fast-food vacancy below 4% and asking lease-rates growth at an annual average of 4% for the last five years.

The research also showed that America is a food nation, which created a hot market for restaurateurs and resulted in a prominent increase in dining options over the last few years. In nearly every market, the fast-casual sector dominated the growth trend, providing consumers with a bevy of food options. Premier locations for leading concepts acted as major draw and remained successful because of high consumer needs.
However, according to CBRE, although Americans are eating better than ever before, economic shifts point toward the start of a slowdown. In addition to customer demand for quality options at low prices, rising employment costs, rent increases and a glut of similar restaurant concepts are shrinking profit margins, and national restaurant performance is trending below previous projections.
Still, Southern California remains a top destination for the nation's leading food concepts, which further tightens vacancy and drives up asking and effective lease rates. Leading restaurant economists predict an inevitable slowdown, however, which should caution restaurant owners and real estate professionals to be more strategic when selecting retail space for new and expanding tenants, CBRE reports.

We spoke with Bobb about how the San Diego region is faring in terms of restaurant tenants and what some of the hot new restaurant trends are in this region.

GlobeSt.com: How is the San Diego restaurant market unique?

Bobb: Mostly it's just the weather and the climate. Restaurant owners try to get their patios big so they can get more customers outside and enjoying the weather. What we're seeing a lot lately are restaurants making their indoor spaces smaller and their patios bigger. A lot of times, you don't pay rent on patio space, so landlords can get higher rent per square foot from space with a patio, and it adds to the energy and experience of the shopping center. We're seeing that a lot in San Diego, and national restaurants get really excited about it because you can't do patios like that in every other market. The interest in patios is higher here, compared to say, Boston for sure—you can't make money off that because it's so freezing cold. You can still use patio space here more than in those markets in the winter.

GlobeSt.com: What are the hot new trends?

Bobb: The biggest thing we're seeing is more fast-casual concepts. You probably notice it, but might not realize that's what's happening. Because minimum wage went up, restaurateurs are trying to create the experience of a sit-down restaurant in a fast-casual restaurant. You place order, sit down and they bring everything to your table. These places might even have a full bar or a tequila bar. This is new within the last three to five years. The group that owns Juniper and Ivy and the Crack Shack is rolling that out. It's not like what you would have thought of five years ago.

Also, we're recently seeing more landlords take risks on restaurants; they're willing to go with the smaller guys, whereas five to 10 years ago, it was all about the chains like Cheesecake Factory. Now, there's so much emphasis on experience and category, so they're doing more with the smaller guys, where it's not a cookie-cutter retail project.

In addition, some centers could be taking up restaurants as anchor tenants. The draw used to be the department store, but now it's the restaurant. They're competing in the same space as the department store did a few years ago. It makes the center different, interesting and authentic.

GlobeSt.com: Which submarkets are strongest?

Bobb: It's really easy to identify them: Little Italy, UTC and Del Mar. Little Italy is a foodie market; people from across the county are going to Little Italy for the restaurants. And UTC is so dominant; it's got great residential affluent daytime demographics and more diverse restaurant options. Del Mar within the next couple of years will see a lot more restaurants coming on line; it's similar to UTC in office, residential, affluence and the daytime component, which is really important to restaurants—making sure you have a solid lunch and dinner crowd. Carlsbad is really close with its restaurants; the Forum is one of the best retail projects in the county, and mall is adding great restaurant options.

GlobeSt.com: What else should our readers know about San Diego's restaurant market?

Bobb: It's really competitive. The local restaurant groups—there's only a handful of people who are executing really well: Consortium Holdings, the Crack Shack guys, David Cohen, Puesto, Stone Brewery, the Patio Group, Tracy Borkham (Cucina Enoteca, Cucina Urbana). As far as landlords go, they're trying to get the best restaurants in their project because it's so important to the rest of your project: the right restaurant, the right menu and the right price point.

We spoke with Bobb about how the San Diego region is faring in terms of restaurant tenants and what some of the hot new restaurant trends are in this region.

GlobeSt.com: How is the San Diego restaurant market unique?

GlobeSt.com: What are the hot new trends?

GlobeSt.com: Which submarkets are strongest?

GlobeSt.com: What else should our readers know about San Diego's restaurant market?

Instant Insights /

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