Alabama Row: Retail Center At 1540 W. Alabama St.

[Luminare]

3 minutes ago, august948 said:

 

I guess we get to see what's next for that spot now.  I'm sure it will get filled with something sooner rather than later.

 

Maybe. That middle spot has still been vacant since this place finished. It honestly shouldn't be hard to market this place. The Menil is packed pretty much everyday, and there aren't a lot of food offerings in the area. While Buff might bit the dust, Lua is doing amazingly well. Its also really good food. A tad pricey, but again good food. We need a lot more food options on this street and Montrose in general. I work on this street, and the only options are either a slightly pricey hotdog or a slightly pricey fried rice, or HEB, or the Subway at St. Thomas. Its a bit ridiculous. The Menil draws a lot of people to this part of the neighborhood there should be more/better options.

Edited January 28, 2020 by Luminare

[Naviguessor]

You’re right Lumi. We tried it and we never thought to give it a second chance. We just preferred to go to Buger Joint, which had a better a Burger, energy, fun dog friendly patio and buzz. Buzz beat Buff. West Alabama is a great street and developing a real identity. Something reflective of its emerging style will succeed here. 

[clutchcity94]

On 1/28/2020 at 5:18 PM, Luminare said:

 

Maybe. That middle spot has still been vacant since this place finished. It honestly shouldn't be hard to market this place. The Menil is packed pretty much everyday, and there aren't a lot of food offerings in the area. While Buff might bit the dust, Lua is doing amazingly well. Its also really good food. A tad pricey, but again good food. We need a lot more food options on this street and Montrose in general. I work on this street, and the only options are either a slightly pricey hotdog or a slightly pricey fried rice, or HEB, or the Subway at St. Thomas. Its a bit ridiculous. The Menil draws a lot of people to this part of the neighborhood there should be more/better options.

Not to mention the entire empty strip of shuttered restaurants further south on Montrose, just south of Richmond. Why can nothing stay open there?

[Ponchorello]

The rent is simply too high now in the Houston area.  When you're paying $50+ sq ft not including NNN's you better have strong sales and margins to stay open.  Couple that with an over saturation of restaurants makes for a tricky equation.

[clutchcity94]

3 minutes ago, Ponchorello said:

The rent is simply too high now in the Houston area.  When you're paying $50+ sq ft not including NNN's you better have strong sales and margins to stay open.  Couple that with an over saturation of restaurants makes for a tricky equation.

If demand is low (i.e. lots of empty storefronts all over Montrose), shouldn’t rent decrease?

[Ponchorello]

Just now, clutchcity94 said:

If demand is low (i.e. lots of empty storefronts all over Montrose), shouldn’t rent decrease?

 

The listing of lower rents is going to take some time as landlords are now so accustomed to the inflation of rent over the last 10 years.  The market is in the process of correcting itself but that could take a couple of years to really set in.  For the last 10 years restaurants have been on a tear in growth but as we are finally witnessing the "cheap" lending and over growth with a changing market is finally starting to show its true colors.  

[clutchcity94]

2 hours ago, Ponchorello said:

 

The listing of lower rents is going to take some time as landlords are now so accustomed to the inflation of rent over the last 10 years.  The market is in the process of correcting itself but that could take a couple of years to really set in.  For the last 10 years restaurants have been on a tear in growth but as we are finally witnessing the "cheap" lending and over growth with a changing market is finally starting to show its true colors.  

lending is as cheap as ever now.

[Ponchorello]

18 hours ago, clutchcity94 said:

lending is as cheap as ever now.

Cheap lending leads to over borrowing...a lot of growth not because of increased sales to each location but rather more traffic because of more locations.  The economics still have to work to pay back any loan whether is cheap money or not.  This is the mentality of a lot of retail/restaurant growth:

 

Location 1 has EBITDA of lets say $15,000/month.  Look Mr Bank/Investor...if we can open 10 more locations they all will make $15,000/month therefore we can pay our notes as we grow.  Too many retailers/restaurants have this growth strategy.  What they failed to realize is the more locations you open the less each location actually makes because you've made it more convenient for consumers to eat/buy your product closer to them.  They aren't purchasing more often because its more convenient and the industry statistics support this. So now you have diluted traffic to each store however the operating expenses are still the same for each location.  Oh and then there's that note you still have to pay back .

 

This is where we are now.  Bad economics and oversaturated markets in addition to inflated rent.

[Luminare]

There is now a "For Lease" sign on the windows of the Buff Burger location. Buff is no more.

[iah77]

On 5/3/2018 at 1:12 PM, H-Town Man said:

 

Looks like y'all beat me to it.

 

And then he'll explain to you that his centers are almost all full, while here with buff burger closing here that this one is 70% unoccupied lmao.

[Ponchorello]

Its officially on the market for $14,633/month all in.  That folks is a lot of $$ requiring a ton of burgers to cover it.

[clutchcity94]

22 hours ago, Ponchorello said:

Its officially on the market for $14,633/month all in.  That folks is a lot of $$ requiring a ton of burgers to cover it.

They basically would have to sell $6.65 worth of food per hour for every hour they’re open in a month (~2,200 hours) just to cover rent. This of course doesn’t account for their other costs like ingredients and paying staff.

 

What are the margins in the restaurant business such as this?

[Ponchorello]

13 hours ago, clutchcity94 said:

They basically would have to sell $6.65 worth of food per hour for every hour they’re open in a month (~2,200 hours) just to cover rent. This of course doesn’t account for their other costs like ingredients and paying staff.

 

What are the margins in the restaurant business such as this?

 

There are none...thats why they closed but typically a strong operating restaurant is right at 13-17%.  This is why your'e seeing out of state/city concepts popping up all over Houston.  They have more stores to pull from for capital.  Mom and Pop restaurants are disappearing being replaced with larger chain concepts.  Have you driven through Rice Village lately...all those original restaurants are just about all gone.  The asking rent is more than doubled.

 

So while they (Buff Burger) may have seemed busy and they did always look busy it was never going to be enough to make any money.  I dont see any restaurant making a profit in that location that is worth all the effort and headache of operating one.  Its my speculation that the Alabama and Westchase locations were pulling funds from their original I-10 location to stay a float.  

 

Another concept thats on the way out is Fajitas a go-go off of Kirby.  The rent there all in is $11,800 a month and its never that busy.  Its only 1500 square foot space with 13 parking spaces.  That restaurant is currently advertising their space for lease. 

Edited March 2, 2020 by Ponchorello

[clutchcity94]

1 hour ago, Ponchorello said:

 

There are none...thats why they closed but typically a strong operating restaurant is right at 13-17%.  This is why your'e seeing out of state/city concepts popping up all over Houston.  They have more stores to pull from for capital.  Mom and Pop restaurants are disappearing being replaced with larger chain concepts.  Have you driven through Rice Village lately...all those original restaurants are just about all gone.  The asking rent is more than doubled.

 

So while they (Buff Burger) may have seemed busy and they did always look busy it was never going to be enough to make any money.  I dont see any restaurant making a profit in that location that is worth all the effort and headache of operating one.  Its my speculation that the Alabama and Westchase locations were pulling funds from their original I-10 location to stay a float.  

 

Another concept thats on the way out is Fajitas a go-go off of Kirby.  The rent there all in is $11,800 a month and its never that busy.  Its only 1500 square foot space with 13 parking spaces.  That restaurant is currently advertising their space for lease. 

How do the thousands of mom and pop restaurants stay open in places like Manhattan, Washington DC, and San Francisco?

[Ponchorello]

1 hour ago, clutchcity94 said:

How do the thousands of mom and pop restaurants stay open in places like Manhattan, Washington DC, and San Francisco?

 

The key word is "open", doesn't mean profitable.  A huge amount of restaurant owners are breaking even or making just enough money to get by.  If you ever have spare time, go and visit the Texas comptrollers office...sit there and listen.  You'll hear a lot of business owners owing back taxes...borrowing from Peter to pay Paul but eventually over time it catches up.  

 

Open doesn't necessarily mean successful...its easy to get caught up in that.  I would be lying if I said everyone is in the same boat because yes some are making a very good living with strong concepts and tightly run establishments but most are not.

 

Not the best example but look at Trudys in Austin...nobody knew they owed 4 million in taxes.  One group here in Houston...The Treadsack group...they also owed investors and the government money.  All we knew was they have to be doing amazing because they keep opening restaurants.  One more example...Verts Kabob...they came and went but at the time the perception is wow they are doing amazing because they blew up all over....Nope.  

 

It will always boil down to solid economics and right now its a disaster out there with astronomical rent coupled with increased labor and food costs.    

 

 

[clutchcity94]

1 hour ago, Ponchorello said:

 

The key word is "open", doesn't mean profitable.  A huge amount of restaurant owners are breaking even or making just enough money to get by.  If you ever have spare time, go and visit the Texas comptrollers office...sit there and listen.  You'll hear a lot of business owners owing back taxes...borrowing from Peter to pay Paul but eventually over time it catches up.  

 

Open doesn't necessarily mean successful...its easy to get caught up in that.  I would be lying if I said everyone is in the same boat because yes some are making a very good living with strong concepts and tightly run establishments but most are not.

 

Not the best example but look at Trudys in Austin...nobody knew they owed 4 million in taxes.  One group here in Houston...The Treadsack group...they also owed investors and the government money.  All we knew was they have to be doing amazing because they keep opening restaurants.  One more example...Verts Kabob...they came and went but at the time the perception is wow they are doing amazing because they blew up all over....Nope.  

 

It will always boil down to solid economics and right now its a disaster out there with astronomical rent coupled with increased labor and food costs.    

 

 

Good insight- thanks. But will rents in Montrose ever drop in the near future? I just don’t see that happening, yet there are restaurants closing left and right in the neighborhood.

[KinkaidAlum]

Landlords are in for a rude awakening. The market is/has changed and Amazon, First Dibs, etc... is killing hard retail. If they chase off restaurants as well they'll be in big trouble. Retailers are hurting in every market but rent keeps rising. What I noticed most about the Rice Village was that in the two years since I moved away, there are vacancies everywhere where there used to be none. It's the same in LA's upscale neighborhoods. Vacant buildings sitting with outrageously high rents. Something has to give.

[Ponchorello]

8 hours ago, clutchcity94 said:

Good insight- thanks. But will rents in Montrose ever drop in the near future? I just don’t see that happening, yet there are restaurants closing left and right in the neighborhood.

 

Texadelphia closed their Montrose location a day ago....but will rents ever drop?  Just depends how much money a landlord has for holdover costs when it's vacant.  If they own the property out right then there is no telling how long they would be ok with it just sitting dark.  Maybe this is how its supposed to be...we never had this many restaurants in years past.  This explosion only began in 2010...prior to that there were not many options.  Thats also when restaurants were in business easily for 20+ years.  Keep in mind a lot of these restaurants used to be properties where either houses used to reside or commercial property for other types of business.

 

3 hours ago, KinkaidAlum said:

Landlords are in for a rude awakening. The market is/has changed and Amazon, First Dibs, etc... is killing hard retail. If they chase off restaurants as well they'll be in big trouble. Retailers are hurting in every market but rent keeps rising. What I noticed most about the Rice Village was that in the two years since I moved away, there are vacancies everywhere where there used to be none. It's the same in LA's upscale neighborhoods. Vacant buildings sitting with outrageously high rents. Something has to give.

 

The likes of Amazon have definitely changed the landscape of retail fronts.  Drive down Alabama and a ton of empty spaces line left and right.  Heres the problem....The City.  The City wants its taxes...the best way is to over evaluate the Value of land and improvements.  That also drives the cost of rent up in the form of triple net fees that are now $15+ sq ft alone.  Most of that due to the ever increasing taxes.

 

Its also why new homes are so damn big...the cost of dirt is outrageous.  The only way a home builder gets their return is building a oversized house and slapping a price tag of $2mil+. 

[KinkaidAlum]

You are 100% right. Property taxes are absurd  in Houston. I paid 3 times more in Houston than I do in Los Angeles despite my home being of higher appraised value here. It's a real issue. If I ever move back home, I've already decided I wouldn't own. 

[Luminare]

Walked by during lunch and saw a group of people inside. Looked to be discussions between a probable lessee and realtor. People were pointing at various things as if coming up with ideas of what to put in the space. Rent might be high as discussed, but a corner space is a corner space w/ a patio and right next to the Menil. This should change hands pretty quickly. If I see anything else while walking by I'll let y'all know.

[LBC2HTX]

Nearby, Night Heron is ready to call it quits and is just waiting for someone else to sublease the space before closing. 

 

http://houston.culturemap.com/news/restaurants-bars/02-27-20-night-heron-montrose-restaurant-for-lease-closing-agricole-hospitality-morgan-weber/

[clutchcity94]

Anyone know what’s going in the Texadelphia spot? That little strip is pretty ugly and doesn’t even look that old. I wonder when that shopping strip was built.

[Luminare]

57 minutes ago, LBC2HTX said:

Nearby, Night Heron is ready to call it quits and is just waiting for someone else to sublease the space before closing. 

 

http://houston.culturemap.com/news/restaurants-bars/02-27-20-night-heron-montrose-restaurant-for-lease-closing-agricole-hospitality-morgan-weber/

 

From reading the article, apparently they switched to a different concept than what they originally had. Thats very risky in a location like that. You kinda need to be uber confident in what you have from the start, roll with it, and advertise the hell out of it. So seems its not necessarily the locations fault, but shift in concepts which probably sunk what little they had already.

[LBC2HTX]

I've been to NH 3 times, once before the shift in concept. My thoughts are that the pivot was for the best as I was way more likely to go back for the second vibe and menu, which was a lot like a tamed down coltivare. 

[j_cuevas713]

39 minutes ago, clutchcity94 said:

Anyone know what’s going in the Texadelphia spot? That little strip is pretty ugly and doesn’t even look that old. I wonder when that shopping strip was built.

I think that strip center is going to renovate or be torn down soon. They've already lost 2 or 3 tenants. 

[HNathoo]

18 minutes ago, j_cuevas713 said:

I think that strip center is going to renovate or be torn down soon. They've already lost 2 or 3 tenants. 

 

Might be tough to tear down with Starbucks as a tenant - those leases generally contain tons of options tying the landlord into a suboptimal use for an extended period of time.

[wilcal]

Is this Starbucks particularly busy? Might be that Starbucks would prefer to move across the street to a potential new development at JitB/Half Price/Specs/etc. 

[j_cuevas713]

45 minutes ago, HNathoo said:

 

Might be tough to tear down with Starbucks as a tenant - those leases generally contain tons of options tying the landlord into a suboptimal use for an extended period of time.

I'm only saying that because I thought I saw a for sale sign on the sidewalk. 

[Ponchorello]

4 hours ago, Luminare said:

 

From reading the article, apparently they switched to a different concept than what they originally had. Thats very risky in a location like that. You kinda need to be uber confident in what you have from the start, roll with it, and advertise the hell out of it. So seems its not necessarily the locations fault, but shift in concepts which probably sunk what little they had already.

 

If that space gets leased at the asking rate it needs to have a heavy dose of alcohol sales or be packed to the gills.  Only problem with that is parking..Ive been to Buff Burger on a Saturday and I couldn't find parking.  Two restaurants in that development makes for very little parking.  What will happen if they lease that inline space????

 

[clutchcity94]

Is commercial rent for restaurants/bars in the Heights as crazy as it is in Montrose? For example, how do the rents compare in the lower Westheimer corridor or on W. Alabama compared to the area in the vicinity of French Laundry.