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Eat, drink and spend money

Restaurants and food vendors are now "must-haves" in retail developments, developers and analysts say.
/ Source: Reuters

In the world of attracting shoppers, retailers of fashion, home furnishings, books and other goods have found a fast friend in food.

Restaurants and other food vendors, such as Cold Stone Creamery ice cream, are now the "must-haves" in retail development, developers and analysts say.

"A restaurant is as important as a department store -- a good department store," Yaromir Steiner, chief executive of developer Steiner & Associates, told Reuters.

Food's new status as a shopping center traffic generator has strengthened with the explosive growth of town-center and "lifestyle" development.

"It's very much becoming a driver," said Friedman Billings Ramsey analyst Paul Morgan.

Lifestyle centers and town centers -- open-air retail shopping centers usually anchored by a home furnishing store, or bookstore -- are now essential to developers.

Even mall owners, such as Simon Property Group Inc. and General Growth Properties Inc. are jumping into the game, building lifestyle centers or adding them to existing projects. Mixed-use projects that combine retail with office or residential development are also on the popular track.

"That's what everyone wants," Morgan said. "People want a downtown feel."

Steiner's company's exhibit at the four-day 2005 International Council of Shopping Centers Convention in Las Vegas was packed with other developers and retailers.

The conference attracted more than 40,000 bankers, brokers, developers and retailers, and "lifestyle" and "mixed-use" were this year's buzz words.

With its CocoWalk open air lifestyle center in Coconut Grove, Florida 12 years ago, Steiner was one of the first lifestyle developers.

"People said you never put restaurants with retail because they take up the parking," Steiner said. "People said you never put movie theaters with retail because they take up the parking." But the retail stores saw their sales increase 200 percent to 300 percent.

Today's development must include enough restaurants to provide a town or lifestyle center with seating for about 2,000, Steiner said.

New power, allure
That has given restaurants new power and allure with mall and shopping center developers.

"They're (the landlords) using the restaurants as mini anchors," said Marci Rude, director of western U.S. real estate for P.F. Chang's China Bistro Inc.

"A landlord will come to a tenant like a P.F. Chang's and say we want to negotiate the deal with you, and we want you to be the catalyst to our project," Rude said.

"It's a situation where they'll say, if we get you signed up, then we can have these other tenants that will drive the project in the direction we want to go.' "

The company currently operates 117 P.F. Chang's and 58 Pei Wei smaller-scale, lower-priced Asian-fare restaurants. It is considered one of the darlings of Simon Property and General Growth, with its plans to add 16 to 20 P.F. Chang's in 2005 and about the same number next year.

"The other thing that's happening is the retailers themselves, whether it be the bookstore or the clothing stores realize that what the restaurants do for them is generate traffic," Rude said.

"If they're good enough restaurants and they're destination oriented they're actually bringing a customer to that shop."

P.F. Chang often does co-tenancy agreements with Pottery Barn and Williams-Sonoma Inc., which require landlords to sign all of them and put them into the same area of the shopping center.

Cold Stone Creamery, which makes its ice cream on site at each store, now has 1,007 stores. Most of the stores are franchises, but unlike most franchise-oriented companies, the parent signs the lease and collects rent from the franchisee. This makes the stores more attractive to credit-sensitive landlords and has helped their expansion.

Most of the stores are in lifestyle centers but there are about 40 in malls. The company plans on expanding to 3,000 in the next three-to-four years.

"We've always focused on lifestyle centers. Now we're mapping out our second strategy," which includes big box shopping centers, mall kiosks, airports -- and Asia, said Brett Sheets, Cold Stone Creamery's vice president of U.S. real estate. "We're looking hard in Asia," said Sheets.