Fast-Casual Chains Eat Up Empty Real Estate

Retail space formerly occupied by big-box retailers is becoming a rosy real estate option for fast-casual tenants.

January 23, 2012

MINNEAPOLIS, Minn. - Empty retail space in the Twin Cities is becoming full with fast-casual eateries.

The Star Tribune wrote last week that spaces left by big-box and junior-box retailers like Circuit City, Ultimate Electronics, Blockbuster and others who have either gone out of business or downsized dramatically are being eaten up by the likes of Chipotle, Potbelly??s and Qdoba Mexican Grill.

Retail broker Chris Simmons of Colliers International lauded the expansion of the fast-casual chains in the Twin Cities area, noting during a Minnesota Shopping Center Association forum that these restaurants will continue entering the market.

"The quick-service restaurants, from Chipotle to Potbelly's, see this as a great market for them ?" it's one of the best because of our high-income, high-education population who don't necessarily like fast food," Simmons said.

In December, Chipotle opened a restaurant in a 7,000-square-foot remodeled Blockbuster store, while a Qdoba Mexican Grill opened in another former Blockbuster.

Blockbuster announced earlier this month that it would close several Twin Cities-area stores. Simmons added these vacant sites are good locations for fast-casual chains.

Large retailers are also abandoning their 20,000-square-foot-plus spaces in favor of smaller footprints.

"Tenants are looking to downsize," Stephanie Meyer, a principal and tenant representative for Mid-America Real Estate Group, told the newspaper. "Look at OfficeMax. You take a 23,000-square-foot OfficeMax and downsize it to 14,000 square feet. They're now deciding what products go in there and how they're going to be as profitable as they were when they were at 23,000."

Meyer, also speaking at the Minnesota Shopping Center Association forum, said there this type of downsizing strategy necessary 10 years ago, and that competition for retail space is not what it used to be because of the recession and landlords handing out larger concessions to tenants. The exception, however, are grocery store-anchored neighborhood centers, writes the newspaper.

"We've got competition all of a sudden for some sites that we're working with a client on," Meyer said, adding, "They haven't seen competition around the country for a long time. Some of these national chains like to take their time on deals, and all of a sudden they've got competition and they're saying, 'What? I thought this was my site???"

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