Landlords Hungry For Local Restaurateurs — Once They Prove Themselves In Someone Else's Building
Developers are changing their tune when it comes to signing lesser-known local retailers over national credit tenants, but Boston restaurateurs still must prove themselves before landing a space in one of the city’s glitzy new developments.
“The city is still in a transition,” said restaurateur Jack Huang, who owns five Japanese restaurants across Greater Boston, including Douzo in Back Bay and the recently opened Sushi Momento in Cleveland Circle. “There’s still a gap between where we want it to be and where we are.”
Boston’s building boom has delivered new developments from the Seaport to Watertown. Neighborhood groups frequently criticize developers for filling up ground-floor retail space with national chains like CVS and Starbucks and not enough local mom-and-pop operators. Developers have previously defended the action, saying their debt obligations restricted them to signing only national credit tenants.
But as more projects hit the market and millennial consumers demand more authentic brands over chains they could find in any city, local tenants say Boston developers are beginning to court them just as much as bigger national brands.
Huang was a partner at Fugakyu Japanese Cuisine before opening his own restaurant, Douzo, in Back Bay in 2006. He followed up with Basho in Samuels & Associates’ 1330 Boylston St. development in 2010, ShabuMaru at the Westin Copley Place hotel and a Basho fast-casual concept by Boston University in 2015. Sushi Momento opened in Brookline in late 2018.
The company has grown to include corporate catering, higher education and wholesale divisions, and Huang’s products are even sold at TD Garden and Fenway Park. But transitioning from one sushi restaurant into a local sushi empire developers want in their buildings is not a smooth road.
“You need to have the stomach to handle it,” Huang said. “I started out my career with $60K in credit card debt. I initially asked myself if the risk was worth it, and I think it was.”
Developers like Samuels have begun to rethink the ground-floor retail component of a project as more amenity space than revenue-generator, and Huang said that has helped operators like him get a foothold in Boston. Still, he said it is nearly impossible for local operators to afford Class-A build-out costs that can go as high as $700/SF in places like the Seaport.
“It’s really about choosing the right partner and developer and knowing yourself,” Huang said. “Who you partner with is who you’re married to. You want the 10-year lease to be a happy marriage, so finding the right partner is key.”
Other restaurateurs say a development marriage of any kind is still hard to come by in Boston, even amid the push for more authentic brands.
Anoush’ella owners Nina and Raffi Festekjian initially wanted to open their Mediterranean "fine fast-casual" restaurant in Somerville or Cambridge. The couple spent 18 months looking at an array of properties around Harvard and Central Squares and near Tufts University but said they were repeatedly beaten out by national tenants. The problem was the Festekjians were not known in the food world and did not already have a restaurant to prove their concept could work.
They ultimately landed in the South End in a building owned by a nonprofit organization and that had been empty for two years.
Anoush’ella opened in September 2017 and has been a neighborhood hit. The Festekjians have plans to expand to other locations, including the upcoming Time Out Market in Fenway. As their brand has become popular, the husband-and-wife team is now fielding offers from the same developers and real estate agents who previously rejected their idea.
“The [previous] locations we wanted, now that we’ve done what we’ve done, now want us,” Raffi Festekjian said.
But even as Anoush’ella becomes a recognized brand and more palatable to developers, the Festekjians say it still is not easy for local operators to get a concept off the ground. Even food halls want to sign recognizable names over up-and-coming talent.
Time Out Market bills itself as a showcase for the best chefs in the cities it operates, and that usually means popular brands over new talent. The upcoming High Street Place has also marketed its lineup of star chefs like Tiffani Faison.
Boston Landing has made a point of signing local brands to its 80K SF retail component at Boston Landing, including Kohi Coffee Co. and Flatbread/Brighton Bowl. NB Development Group Managing Director Jim Halliday said the local retail mix fits with Boston Landing's push to become more of a livable neighborhood, but he admits the development team was still looking to sign proven local brands.
Flatbread already had a popular pizza and bowling alley operation in Somerville, and Kohi is a well-known coffee shop in Provincetown.
“For us, we were looking for those companies that already had an initial brick-and-mortar operation but not necessarily an extensive one,” Halliday said. “That said, we’re still wanting to cultivate a local, homegrown atmosphere here.”
The developer hunger for more local favor, even if it is for recognizable brands, is still a boon to local operators. The Gallows Group owner Rebecca Roth Gullo expects even more homegrown concepts to flourish.
Gullo oversees South End hot spots like The Gallows, Banyan Bar and Refuge and Blackbird Doughnuts. The pastry shop has expanded beyond the South End to Harvard Square, Brighton and Samuels & Associates’ Van Ness building in the Fenway.
Along with Samuels, Gullo said National Development, Boston Properties, Related Beal, Wilder Co. and Boylston Properties have all been willing to work with more local retailers. With so much development happening in the city, developers recognize local concepts downstairs help drive profits upstairs.
“Developers have an acute awareness of the local brands in Boston,” she said. “All those guys have been really understanding and willing to work with us when it comes to [tenant improvements] and how it’s extremely important for these high-rises to have amenities. Food is an amenity.”