Chain reaction

While the large chains gobble up the higher-priced commercial real estate in north Tampa, mom-and-pop shops and restaurants struggle to pay the increasing rents.

By MICHAEL SANDLER

© St. Petersburg Times,
published October 5, 2001

WEST MEADOWS -- The fish and lobster travel more than 1,600 miles each week to reach Oceans New England Seafood and Grill. If only more customers could drive a few miles.

Charles Magro pays good money to rent 1,400 square feet for his restaurant and flies in shipments twice a week from his native Bangor, Maine, just to live up to his billing.

But traffic passes by without noticing his small sign, wedged between ubiquitous storefronts at the New Tampa Center. The hungry scan the evolving landscapes in New Tampa for familiar names. A place like Oceans is easily obscured when competing against a sea of chains opening along Bruce B. Downs Boulevard.

"We don't pack the house like we need to," said Magro, who serves dinner only, six nights a week, but still struggles to fill his 12 tables on a regular basis. "Everybody loves the food and the atmosphere, but we don't draw enough customers."

Location has always been the rule of success for restaurants, and New Tampa is a place of promise. But growing demand for commercial real estate has forced small, family run businesses to settle for scraps in antiquated strip malls as hulking corporate chains seek out the newer centers.

"I happened to get lucky when I stumbled on this place," said Magro, who pays nearly $23 per square foot, plus an additional $5 in fees per square foot, to be in the center off New Tampa Boulevard.

The past decade's construction boom created this vibrant new market, sending the price of commercial real estate through the roof. Space in some new buildings can cost as much as $30 per square foot, a number that dwarfs many retail areas in Tampa Bay.

Brokers say the high prices reflect a growing demand for limited space in neighborhoods filled with young, affluent families. Mom-and-pop shops and restaurants rely on customer loyalty that builds through word of mouth. But consumers here, who often are transplants, desire immediate service and brand recognition, tilting the market toward corporate chains.

Chains tend to have deeper pockets and a proven record of handling large volume, hence their ability to pay high rents -- or cut favorable leasing deals. Panera Bread and Chili's draw immediate crowds in desirable locations such as Highwoods Preserve, while Oceans, sitting up near Pebble Creek, hopes to attract a few more local customers each night and stay in business.

"They say they want those restaurants, but will they support them?" said Lee Arnold, CEO for Colliers Arnold, a commercial real estate brokerage firm that has filled shopping centers in New Tampa and around the region. "It takes years. A national chain might open one up, and overnight it's a success."

A Cold Market

Dan Byrne has been in the ice cream business nearly half his life. He always dreamed of owning a Dairy Queen. In 1998 he saw his chance in New Tampa.

He predicted Highwoods Preserve would grow well beyond the Muvico Theaters, a location that begged for an ice cream shop. So he sold his Baskin Robbins store on Fowler Avenue and leaped at a deal to rent a 1,600-square-foot store off Bruce B. Downs for $16 a square foot.

"We felt that if we didn't get in at $16 per square foot, we don't get in," said Byrne, a 51-year-old Pittsburgh native.

The move proved brilliant. Though it took almost three years, Byrne opened in late 2000 and has had lines to the door since. Success has translated into plans for two more Dairy Queens in the next year, one in Meadow Pointe and one farther north in Wesley Chapel. His son-in-law and some family friends have come on board as partners.

Dairy Queen is a franchise business, sort of a hybrid between corporate-owned chains and true mom-and-pops. Byrne runs his store independently, but pays 8 percent of his revenues to the company for product development and national advertising.

He might have been every bit as successful without the Dairy Queen name. No matter. Before he even had a shot, he had to convince a real estate broker that his business was viable.

"They feel if you can't pull it together on your own, you don't belong in that market," Byrne said. "They look at your exposure in the marketplace, your experience and your credibility."

The price

Colliers Arnold has matched tenants with many New Tampa shopping centers.

Mostly, Arnold said this means finding household names to anchor new retail centers. Occasionally they seek smaller businesses to round out the field. In other cases, they steer independent businesses to older spaces.

"We typically are hired by a developer to come up with a tenant mix, and that really depends on the type of center the developer is planning," said Arnold. "At the end of the day, it is a lot about inventing a retail environment that is synergistic."

When everyone wants to enter the mix, the price goes up and smaller players are priced out.

Right now, space in some New Tampa shopping centers can cost $20 to $25 per square foot, said Jim Kovac, a retail specialist for Colliers Arnold. Near Highwoods Preserve, it goes as high as $28, plus additional fees for maintenance, insurance and repairs. That's on par with new strip centers in South Tampa. For older shopping centers along N Dale Mabry Highway in Carrollwood, rental space can cost between $15 to $18 per square foot, Kovac said.

"Activity breeds activity, and it's been an active market," said Kovac, who has handled plenty of leasing activities in New Tampa.

Kovac personally helped bring Panera Bread to Highwoods Preserve. When Lifestyle's Fitness initially balked at the area, Kovac took representatives from the health club up in a plane for a view of the activity from above. The St. Petersburg-based health club recently opened at Palm Lake Shopping Center.

"When they are successful," said Kovac, "others are going to come. At some point, they saturate the market."

The Little Guy

In 1988, long before people complained of traffic on Bruce B. Downs, Jane Theriault opened the Boston Cooker in Tampa Palms and built a strong following among New Tampa's pioneers.

In time, more people came and the rent at the City Plaza Shopping center went up. Theriault understood each time. For years Theriault, who declined to give her exact costs, said she was paying market rate. But in 2000, the management company raised the rent beyond what she could pay. Theriault closed the Cooker instead.

Before raising the rent, Theriault said Trammell Crow, the management company, had negotiated with other tenants willing to pay more.

Paul Royak, the agent who handled the property for Trammell Crow, said then that his client made a decision based on what the market would bear. He said he had more than six offers for the property and tried to negotiate with Boston Cooker.

"We knew we would pay a higher rate," said Theriault. "If it went up 25 percent, we would have been comfortable. But the increase was huge."

Bonnie's Hallmark, next door to the departed Cooker, has been part of that shopping center since 1994. But last year, Bonnie Tippon learned the owner of a liquor store was preparing to go before city council seeking a permit to open another store -- right in the space she was renting.

"We didn't even know that they were negotiating a new tenant's lease until a local police officer came in and gave us notice of this meeting that was about to take place," said Matthew Tippon, 29, who has been managing the store for his mother, who has been ill.

Local residents joined the Tippons in fighting the request and City Council denied the permit. The management company still raised their rent to about $23 per square foot.

Lately, the store has struggled to turn a profit. The economy is sinking and sales are down. Tippon said he has cut some staff and fears lower sales at Christmas, the busiest time of the year. The only thing certain is the high cost of rent, which can always go up.

"I would say it is a concern that we need to keep an eye on," he said.

Faith in flying fish

Magro believes people will pay money for service.

For more than a decade, he and his wife split the seasons, running the Yankee Chowder House North for three months during the summer in Bar Harbor, and six months during the winter running the Yankee Chowder House South in Zephyrhills.

In 1996, they noticed the growth in New Tampa and began thinking about one restaurant.

"We always kept our eyes open," said Magro, 34. "We knew we wanted to tap into that market."

In July, he opened Oceans. Twice a week, he flies in the fish. In between trips to the airport, he rotates from the kitchen to the dining room. One minute he's seating customers and recommending the Almond Crusty Haddock, the next he's cooking it.

Sometimes he worries. He admits the money he pays is fair for the area, but he can't compete with bigger names. He has no money to advertise. Everything goes into rent and operations, and the restaurant can be hard to spot from the road.

But he has faith that people will come to sit in his burgundy chairs with matching napkins and roses on each table. They will come to marvel at his collection of lighthouses and fishing poles on the sky blue walls. They will come to taste his seafood pasta.

"They can go to the chain restaurants," said Magro. "But they won't be getting something flown in fresh. It's never direct like in the small, family run business."

- Michael Sandler can be reached at (813) 226-3472 or sandler@sptimes.com.

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