Many restaurants are giving up their leases and shuttering their doors because of COVID-19.
But, for every location that closes, it appears a new one is opening, as operators are seizing the opportunity to lease turnkey spaces and expand their operations despite the pandemic.
Mike Conger is principal at Commercial Asset Advisors, a full-service commercial real estate brokerage firm in Kearny mesa. He said he’s been most surprised by the demand and how quickly newly vacant properties are being snagged by restaurant operators, particularly by smaller mom-and-pop shops.
“Five years prior to COVID, finding a built-out restaurant that was vacant and up for lease was very difficult in San Diego,” he said, adding that he mostly focuses on suburban areas like La Mesa, Spring Valley and Chula Vista. “It can take $100 to $200 per square foot to build out a restaurant and can take up to six months just to get a permit. Post-COVID, there was this anticipation that all these restaurants were going to close and there would be tons of vacancy. But, as we started to market those locations, we have seen a lot more interest than people have anticipated. These are mostly from quick service restaurants that can handle delivery and take-out and are set up a lot better for this climate.”
Brian Jenkins, principal at Commercial Asset Advisors, said although landlords are motivated to get new tenants in vacant spaces, it is a misconception that they are offering lower lease rates across the board. He said there are a couple of factors that are taken into consideration, including location, how long the space has been vacant, who was at the location prior and the success of the future operator, among others.
Since COVID-19, Jenkins said Commercial Asset Advisors has done three deals in which one operator closed and another took over the lease. He said one of those leases was 25% less than the prior renter’s, while another was up by 7% when compared to that of the previous lessee.
“Every landlord’s tolerance for vacancy is different,” he said.