Stadium Businesses Clobbered By Lack Of Traffic Look To Landlords For Mercy
When San Francisco allowed restaurants to only open for takeout in March, Kash Feng opted instead to just close the Mission Bay location of his popular Dumpling Time concept.
With another Dumpling Time site in the nearby Design District area and better positioned to adapt to the new mandate, Feng said it made sense to temporarily shutter his outpost next to the Warriors' new Chase Center NBA arena.
"Obviously, anybody who is around here and paying the rent that they're paying is betting on the sports fans and events," Feng said. "That's kind of our financial model to begin with."
The absence of fans since March is also plaguing arenas and ballparks around the country and is likely to persist through at least the rest of the summer. With the coronavirus pandemic worsening, the NBA and MLB have plans to resume their seasons without fans at both remote locations and home stadiums.
The NBA, which saw over 20 million fans shuffle into its arenas last year, will restart play in Orlando on July 31 without any spectators, while the MLB, which saw over 68 million fans last year, plans to start a delayed season on July 23 through the league's usual ballparks.
Though the restart bodes well for television viewership, it brings nothing to property owners and businesses like Feng's as they contend with diminished foot traffic and engage in constant talks with their landlords.
In the case of the Mission Bay location of Dumpling Time, which fully opened in February as the first restaurant to do so in Chase Center's "Thrive City" area, the landlord is the Golden State Warriors. The franchise has been very supportive through the pandemic, Feng said, and the restaurant hasn't paid rent during the crisis and decided to officially reopen on Wednesday with outdoor dining now allowed in the city.
“We’ve been working very closely with the Warriors to try and figure out our rent situation," Feng said. "We still don’t have a solution, but both parties are in a partnership mode and trying to resolve the issue, so I’m very positive that we’ll resolve this in a very reasonable way with the Warriors organization.”
Feng said he understands both the Warriors' own predicament and a landlord's expenses and need for revenue. But he also said an unacceptable number of service businesses and retailers, especially those near sports venues, won't survive without a continued break.
“If a landlord is not willing to work with a small business like us, not many people are going to make it through," he said.
Cushman & Wakefield Vice Chairman Kazuko Morgan, who works with the Warriors on leasing their Thrive City retail space, declined to quote specific retail average asking rates, citing variation by size and market uncertainty. But she said base rents are similar to market averages elsewhere in the city.
In Q2, average retail triple-net asking rent in S.F. came out to $43.65 per SF per year, according to Kidder Mathews.
Other landlords of sports-reliant properties have negotiated breaks for their restaurant and retail tenants. MRP Realty is giving rent deferrals, abatements and other relief to its food and beverage operator tenants near Nationals Park as they struggle with the pandemic shutdowns and dearth of D.C. baseball fans, according to MRP Realty Principal John Begert.
"They're all good operators and are smart and have put themselves in a position to weather the storm, but it's a totally different ballgame," Begert said.
Nondining establishments near sports venues have struggled as well. Jonathan Brimer, co-owner of sunglasses retailer Select Shades, said it has reopened each of its five locations but one.
Like Feng and Dumpling Time in S.F., Brimer said it didn't make sense to keep open the store The Battery Atlanta, a retail and entertainment destination developed by the Atlanta Braves near the team's new ballpark. Select Shades has been closed there since mid-March.
“We just felt like there’s no way it’s going to be anything but a financial burden on us right now due to lack of traffic," Brimer said. "Without any sort of large-scale activities drawing people to the Battery, we just didn’t feel like there was ever going to be enough critical mass for us to make it worth it to reopen that location.”
Also like Feng, Brimer said Select Shades' sports franchise landlord has been very cooperative and "an excellent partner." The Atlanta Braves have allowed Select Shades to pay an abated rent on its Battery Atlanta location during the pandemic, according to Brimer. He declined to say much how he pays in monthly rent for his space.
Even so, Brimer said he doesn't see the location reopening by the end of the year, calling a March or April 2021 reopening "the best-case scenario."
Last year, between March 14 and July 9, which is the period Select Shades at The Battery Atlanta has been closed this year, it saw $52K in sales, according to Brimer. The company also had to furlough four employees specific to that location and significantly cut the hours of its companywide director of retail, he said.
Though the MLB didn't rule out the possibility of fans in attendance later in the season when it introduces its reopening plan, some in the league, like Dodgers President Stan Kasten, have said it is not on the table.
Among the optimists are Houston Astros owner Jim Crane and Texas Gov. Greg Abbott, who has called for half-filled stadiums. But Texas has since seen possibly the worst of a nationwide resurgence in coronavirus cases that has led to reopening rollbacks.
In the NBA, some possible timelines for fans returning look even worse. The league's players' association reportedly expects the NBA to keep fans out of attendance next season as well.
In D.C., where the Nationals saw an average of about 28,000 fans in their 81 regular-season home games last year, even half capacity would have a "meaningful hit" on businesses around the ballpark compared to normal years, Begert said.
At the same time, he said he expects games at the ballpark to bring fans to the neighborhood's establishments, which include places like Dacha Navy Yard, a beer garden, restaurant and tenant of MRP Realty. If it weren't for health concerns, he said he thinks the businesses would still do well, even without fans at Nationals Park.
Bay Area Council Economic Institute Executive Director Jeff Bellisario, who has studied the economic impacts of sports venues and helped work with the Oakland A's on their new ballpark efforts, said some stadium areas will fare better than others.
Markets with reliable daytime traffic, such as Mission Bay, with its robust life sciences sector, could help retail and dining tenants, he said. As a result, remote work is possibly "an even bigger impact and potentially a longer-term impact for some of those businesses" than the current dearth of fans, Bellisario said.
Feng said he expects his restaurant to pull through, thanks to an ability to capture business from Mission Bay workers and residents. In the last two decades, Mission Bay has seen the development of almost 5,800 homes, according to San Francisco's Office of Community Investment and Infrastructure.
"All of our restaurants are neighborhood restaurants, and it's the same model with Dumpling Time in Thrive City if you look at our price point and our menu design," Feng said. "We're designed to be a neighborhood restaurant."