Atlanta Developer Concerned About A Restaurant Bubble
The retail head of a major Atlanta commercial real estate firm thinks there are too many restaurants in Atlanta, and that should worry the local retail industry.
“You got so many new restaurants,” Ackerman & Co. President of Retail Leo Wiener said. “As a developer, I'm extremely cautious about if they are all going to survive.”
Wiener's concerns are founded in some concrete data. According to Atlanta-based NetFinancials Q2 restaurant survey, sales volumes fell by half a percent, with 62% of the 113 non-franchised Atlanta restaurants participating in the survey reporting declining sales. Atlanta restaurants have seen sales declines through the first half of 2017, according to NetFinancials. So far this year, restaurants tallied more than $160M in sales.
The growth of new eateries in Atlanta has been staggering. As of July, more than 700 new restaurants opened, according to FoodService Resource Associates.
“The substantial growth of new restaurants continues to siphon diners from established operators, producing a negative impact on existing store sales,” NetFinancials founder Bob Wagner said in a report.
Wiener said Ackerman has become selective on restaurants, especially pumping a lot of money into space for a specific operator. Restaurants have been about capitalizing on a diner's experience, and the space plays into that. But many new restaurants fail to survive past the first few years, making it risky for developers to spend a lot money on restaurant spaces, Wiener said.
“I don't believe we're at a restaurant bubble at this point,” Cornerstone Development Partners' Wesley DeFoor said.
For Cornerstone mixed-use developments in Atlanta urban core, restaurants are key to their success, DeFoor said.
“We're looking right now at the opportunity to convert an existing multifamily project into a high-end Airbnb,” he said. But for a space at the lobby level, Cornerstone is in talks with an unnamed chef to open a restaurant. “Where it is in the market and the fact that we'll have patrons on a short-term basis, having it in the building from a convenience aspect."
Ackerman recently secured deals with a chef-driven concept called Firepit Pizza at Paces Property's Larkin on Memorial mixed-use development, Wiener said. It is part of a lineup of chef-driven restaurants at the 63K SF mixed-use project under development in Atlanta's Eastside.
Overall, Atlanta's retail market is continuing to gain traction, especially as the metro area adds population and new jobs. Retail landlords in Atlanta have seen some 1.5M SF of positive absorption through the first half of the year, the most in any first half since 2008, according to a recent Colliers International report. That has helped push the average vacancy rate to 8%, the lowest level since 2005.
The growth of restaurants does not look like it will abate any time soon. And dining has been a major thrust in new retail development, especially with food hall concepts like Krog Street Market and Ponce City Market.
“Even the Mall of Georgia has recently announced renovations to their food courts, which they will now call 'The Dining Pavilion,'” Colliers officials said in the report. “Food halls’ success stems from consumers’ growing demand for dense, walkable communities. An easy way to create this experience in the suburbs is by taking multiple restaurants and putting them under the same roof.”
Wiener and DeFoor will be among the panelists at Bisnow's The Future of Atlanta Retail, Mixed-Use & Entertainment event along with North American Properties partner John Kelley, Concordia Properties Executive Vice President Richard Dippolito and Atlanta Hawks Chief Operating Officer Thad Sheely at 7:30 a.m., Thursday, Nov. 9, at the Georgia Tech Hotel & Conference Center.
