Restaurants are latest to see shortage of supply
First it was the shortage of prime office space, then a shortage of housing and especially student accommodation, next came the shortage of hotel bedrooms. Now it's a shortage of space for eateries - both restaurants and cafes. CBRE estimates that there are requirements more than 30 restaurant outlets around Dublin from both international and Irish restaurant chains.
Competition has become so intense that restauranteurs are outbidding retailers with both key money as well as the rents. This is especially the case for units which already have catering as a permitted use. For other types properties it can prove costly in terms of time and money trying to secure a change of planning permission for restaurant use.
However one of the concerns of Niamh Sheahan of CBRE is that landlords may succumb to the temptation to go for a tenant who offers the highest rent - a decision which may prove the wrong in the longer run.
"Landlords need to consider other factors such as the strength of the covenant, in other words how long the tenant is likely to sustain the rent and lease terms. You don't want to let it to somebody who is may have to pull out after two or three years and then the landlord has to go through the letting process all over again," she explains.
Her colleague Simon Cooper says that within the eatery sector there is also competition from four sub-sectors: casual fast dining, coffee operators, white table cloth sector and the salad and sandwich bars.
In the casual fast dining sector chains such as Milanos, Nandos and newcomers Five Guys and Zizzi are looking for sites. In addition Irish operators are also expanding such as Bunsen which has burger restaurants in Temple Bar, South Anne and Camden streets.
In the coffee sector Starbucks, Costa, Café Nero and Insomnia are looking for units of around 1,000 to 2,000 sq ft in competition with independents.
The white table cloth sector is also expanding.
Catering for the lunch time office trade is the salad and sandwich bar sector and one of the most recent arrivals in this sector is Freshii. Niamh Sheehan recently acquired a second outlet for Freshii on Mespil Road in Dublin 4.
Freshii acquired its first outlet in CHQ in the IFSC and it plans to open up to eight outlets by the end of this year including one in Belfast and another in Cork. Within three to five years it intends reach to have between 30 and 40 outlets.
CEO Dave O'Donoghue and his partner Cormac Manning held senior management positions in Cuisine de France, IAWS and Aryzta before deciding to branch out on their own and they acquired the Freshii franchise for Ireland last February.
"We had hoped to have opened in a high profile location before the end of 2015 but because it has proven so difficult to get a suitable site we are three months behind schedule as our Mespil Road outlet won't open until March," he explains.
"Our customers are mainly millennials who are a discerning, health conscious market so we will have to make sure that each one works before opening the next one. It will be a matter of eating in pieces," he adds, describing the expansion process rather than the dining experience.
O'Donoghue is looking for stores with an average of about 1,000 sq ft but it can operate with around 500 sq ft for takeaways. Smaller units will also work where it can share kitchens such as where it links up with catering contractors in hospitals, universities and airports. It also plans to follow the Insomnia model of opening shops in shops.
Freshii's menu includes a hot offering such as burritos and quinoa bowls, as well as a cold offering such as custom made green wraps, smoothies, juices and salads.
Competition for properties between restaurant chains is also impacting on other aspects of the property market especially the retail market.
According to Simon Cooper where retailers may budget for rents of €40 to €50 per sq ft, restauranteurs are willing to pay between €60 to €80 per sq ft for similar units outside of the prime areas.
The strongest retailers are focussing on prime locations whereas restaurants are willing to be more creative both in terms of location and use of the space," he adds.
Elaborating on this more creative approach, Niamh Sheahan instances how celebrity chef Andrew Rudd took a 4,528 sq ft unit in the Times Building, owned by Kennedy Wilson. It is located between D'Olier and Westmoreland Streets in a section of Fleet St which, because it used to house the Irish Times print works, had for decades had an industrial ambience. Now Rudd's Medley venue benefits from a double height glass unit in an office setting, divided between a café/ bistro on the ground floor and a mezzanine area for corporate dining, weddings, private parties.
Restauranteurs are also willing to pay key money and recently an unnamed restauranteur paid as much as €250,000 key money to acquire the lease on a restaurant near Temple Bar.
Cooper thinks that one of the ways to address the shortage of restaurant space would be for Dublin City Council to ease off on its planning restrictions.
Richard Guiney of Dublin Town agrees with Cooper that the council needs to allow more restaurants. "This is something that we are picking up on consumer research. People increasingly see shopping as a social activity and wish to enjoy a meal or cup of coffee as part of their shopping trip. We believe that there is a case to be made for changes of use from retail to hospitality where the entire district would benefit from it," he says.