How are restaurant trends affecting Knoxville’s commercial property market? In this Q-and-A, NAI retail specialist Brian Tapp gives a low-down on the intersection of food and square feet.
Q: To what extent is restaurant activity driving retail real estate currently?
Tapp: I would say the majority of calls I get are restaurant-related, 60 percent or so.
Q: What do you make of Peerless and its decision to move away from the steakhouse concept?
Tapp: It’s an evolution. People are just interested in something different than your normal steak and potatoes. They’re exposed to more food and food culture through media outlets like Food Network and with access to better information and recommendations through tools like Yelp and Open Table, I think people are willing to branch out beyond the old standards.
It used to be that when you’d go on a business trip, you’d say ‘Let’s go find a Ruth’s Chris,’ a steakhouse and that’ll please everybody and you can put it on an expense account. I think now people can get on Yelp and find recommendations and be more adventurous. And that hurts places like steakhouses and your bar-and-grill places like Applebee’s and Outback.
Q: Who does that help?
Tapp: It helps the local guys big time.
Q: What’s the impact for landlords?
Tapp: A lot of them have these big restaurants that are 4,000 square feet plus. If they’re your normal kind of bar and grill, you’re going to see a lot of those get torn down and redeveloped into something else.
Q: What kind of interest are you seeing in Knoxville from restaurateurs and chains in other cities?
Tapp: There’s still a big push from the fast casuals and fast food. They’re just continuing to want more and more spaces, and drive-through has been a big push, because people don’t want to get out of their cars. For example, Starbucks typically used to want freestanding buildings, but now they’d rather be in a small shopping center, in an end cap with a drive-through.
Q: Are there any new trends in cities like Nashville that will arrive in Knoxville soon?
Tapp: I think more of your chef-driven restaurants will start to pop up here in the next year or two.
Q: Where will they go? Is there a sweet spot geographically for a restaurant like that?
Tapp: I think it’s going to be downtown and the Old City. You’ve got a nice-sized residential population nearby that’s growing, you’ve got cool buildings and rents are less than Market Square. You’ll probably also see some stuff on the South Knoxville waterfront, because it’s less expensive. With those types of restaurants, you can’t go and pay a huge amount in rent, if the business model is going to work.
Knoxville has been missing that kind of chef-driven restaurant trend, but we’re evolving from being a very steak-and-potatoes town, slowly but surely. I think the food trucks and things like Trust Fall — a dinner club focused on local chefs — are helping us kind of move forward.
Q: Speaking of food trucks, what’s their impact?
Tapp: It’s a good jumping-off point for somebody to go and do something simple they really love. You can go and test it and you’re not spending the capital on a location that’s unproven and a concept that’s unproven. You can kind of go and tweak your menu and grow your following. So when you find a critical mass and a sweet spot, then you go and do your own restaurant.
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