The right moves: Restaurant sector is red hot
As a recovering estate agent, most of the restaurants I eat in are Michelin starved, rather than starred.
Nonetheless, despite the drop in consumer spending, the restaurant sector survived the recession well and has reignited to become one of the hottest areas of demand for property. Alongside that, with shopping centre owners and town planners seeking to maximise the "customer experience," restaurants have become key for drawing footfall. So what's cooking in the sector?
Improved trading and expansion by established operators, a slew of new entrants and a shortage of supply have combined to create intense demand for properties from all areas of the restaurant business. In Dublin the planners are restricting restaurant uses which is making existing premises with restaurant use more valuable and rents are rising. In the suburbs there have been two recent refusals for "drive - thru's" and the fast food operators are facing new levels of objections to planning applications from schools and residents.
The supply of suitable units in shopping centres is tight too and for proof of the frenzied demand, look no further than the Hines extension to Liffey Valley where five of the six restaurant units are already pre-let to Cosmo, TGI Friday's, Milanos, Prezzo and Eddie Rocketts. Rents in shopping centres are in the region of €500-600 per sqm and are reaching €700 per sqm in the city centre, depending on unit size and location. Operators are back paying "key-money" of €200,000 for leases.
The "fast-food" operators seem to be concentrating efforts on opening new drive-thru's and McDonalds and KFC opened recently at Carrickmines. Rents for drive-thru's are between €150-€200,000 per annum.
Most of the demand is in the mid-range, family restaurant sector where 250-300 sq m is the ideal size. There's a strong Italian flavour to the demand and established operators like Milano's, Eddie Rockets and Nandos, who are all expanding, have been joined on the acquisition trail by brands like Prezzo, Ask, Zizzi and 5 Guys, who are all struggling to find units. Each operator would take several restaurants in Dublin followed by Cork, Galway and Limerick.
At the higher end demand is strong too for units of 250-300 sq m. There's more Indian operators coming into the market, joining names like Jaipur and Kinara. In the city centre, operators are so keen to expand that they are taking short leases, for example, Beeftro in Balfe Street, Dublin 2.
Demand for coffee shop premises is also boiling over, driven by Starbucks, Insomnia, Cafe Nero and others. Coffee shops are ideally 50-100 sq. m and operators pay rents from €50-€100,000 p a. Most units in Dublin are going to "best bids." The former "Munchies" shop on Sth. William St attracted offers from 10 coffee operators.
With pubs offering more and more food, the line between pubs and restaurants is blurring and chains like JD Wetherspoon have added to demand.
Diners have a huge range of options when choosing where to spend their money. People's favourite restaurants will always be the ones with the friendliest staff and in my view, personality and a sense of fun is more important than the menu. Business is too competitive to allow your restaurant to be fronted by people who shouldn't be in the hospitality business.
Many restaurants would benefit from some "mystery shopping" as I don't believe the owners know exactly what their customers are experiencing. Many restaurants make the same mistakes and they can be easily sorted out. For business diners, the most annoying thing is the repeated interruptions by waiters who aren't trained to remember who ordered what.
I once saw a waitress in Cork take orders from 20 businessmen in a bar and she then served the correct meal to each person, in the dining room, without interrupting. I asked her how she had done it and she had made a note about each diners tie as they ordered. The best service usually costs nothing.
I am honoured to have been invited by Pat Davitt, CEO of the Institute of Professional Auctioneers and Valuers, to be the after dinner speaker at their annual conference on June 20. Some 250 delegates will attend the event at Carton House, Co Kildare and the theme of the conference is "Meeting the challenges of economic recovery." Further information is available from the institute.