Fast-casual restaurants are just what landlords ordered

Fast-casual restaurant chains are filling up more than just empty stomachs around the Twin Cities.

These designer burger joints are also filling the spaces left by big-box and junior-box retailers like Circuit City, Ultimate Electronics, Blockbuster and others who have either gone out of business or downsized dramatically.

Veteran retail broker Chris Simmons of Colliers International -- a tenant representative whose extensive list of clients include Smashburger, Wendy's, Chipotle, Aldi, Sears and Kmart -- lauded the expansion of the upscale "quick-service" restaurants in the Twin Cities. The concept combines the speed of fast-food outlets like McDonald's and Wendy's with the fresh, gourmet ingredients of a higher-scale eatery.

During a Minnesota Shopping Center Association forum earlier this month, Simmons predicted these chains would continue to pour resources into the area market.

"The quick-service restaurants, from Chipotle to Potbelly's, see this as a great market for them -- it's one of the best because of our high-income, high-education population who don't necessarily like fast food," Simmons said during the forum.

Chipotle Mexican Grill in December opened a restaurant in a 7,000-square-foot remodeled Blockbuster store owned by Lupe Holdings Corp. of Minneapolis, near the Cliff Road interchange on Interstate 35E.

In Eagan last month, a Qdoba Mexican Grill opened in another former Blockbuster, this one at the Eagan Promenade. That Blockbuster was built in 1996 and 10 years later was renovated to include a 2,200-square-foot Potbelly Sandwich. Now it has another popular restaurant chain.

"There's lots of concepts contacting me right now," Simmons added.

But his optimism is more than tempered by pessimism about the fates of current "big-box" users.

'Tenants are looking to downsize'

"I think we are going to see some more failures [among big-box users], especially among office supply, books and electronics," he said. "Why is this happening? Because young people who grew up with the Internet are basically using [big-box stores] as showrooms for items they end up buying online from Amazon.com."

"Tenants are looking to downsize," agreed Stephanie Meyer, a principal and tenant representative for Mid-America Real Estate Group. "Look at OfficeMax. You take a 23,000-square-foot OfficeMax and downsize it to 14,000 square feet. They're now deciding what products go in there and how they're going to be as profitable as they were when they were at 23,000."

In general, Meyer said, it remains a tenant's market in retail, reflecting a continuing tough economy in which consumers are keeping a tight grip on their wallets and landlords are handing out big concessions to land tenants.

One big exception, however, are grocery-anchored neighborhood centers, which remain so popular that would-be tenants are fighting for prime spaces.

"We've got competition all of a sudden for some sites that we're working with a client on," Meyer said. "They haven't seen competition around the country for a long time. Some of these national chains like to take their time on deals, and all of a sudden they've got competition and they're saying, 'What? I thought this was my site.'"