Millennials love food. Millennials love spending money on food. Millennials love spending a lot of money on food. And where there is Millennial disposable income to spend on innovative, authentic and comparatively expensive food, there tends to be a higher percentage of income available to allocate to housing costs, e.g., rents!
In recent years I have coined the expression “Food is the hobby of the Urban-Millennialist” and as such, food hobby-ism is alive and well in Seattle. Young people, mind you—those in the ideal renter cohort, talk about food, take pictures of food, Tweet, Instagram and Snapchat about food (remember, Facebook is so 2013). Food is not an obsession. The choice in where to dine is a recreation, an identity and a lifestyle.
In my “Follow the Fork” series I will explore several new paradigms for how the Millennial relationship with food – and more importantly, restaurants – can provide critical insights to apartment developers, owners and investors. In this first installment we explore how following innovative restaurants, or restauranteurs, to new locations can inform decisions on where to build and/or invest in apartments.
First, why does this matter?
In an ever growing competitive environment for renters, it is essential for apartment developers and investors to understand the needs and desires of their customers. Making the right decisions about location, unit mixes, amenities, brand and management can all lead to higher NOI and a competitive advantages over other renting options in the marketplace.
Following use of disposable income is a great measure of what is important to renters once basic necessities are met. As Millennials spend on average 43% of income on food, by varying measures an amount 10 – 20% greater than the Boomer generation, food and restaurant choice both results in Millennials finding new neighborhoods and expressing their own identity – both important facets of apartment selection.
The Mechanics of Food Driven Neighborhoods
The choice in restaurant location, at least for young, inventive chefs, is often times more a function of economics than site selection. If you are Thomas Keller you put your restaurant right where you damn well please. For the most part, the same reigns true for Cheesecake Factory, Olive Garden or McDonalds. I hope that you are catching my drift; these are not the right restaurants to follow.
If you are a young chef looking for a location you are guided by two basic metrics – cheap space as cool as you can get it. If said chef works hard enough and produces enough buzz, another young, inventive chef comes along. Once word hits the streets, voila – you have a cool, reinvented neighborhood. And where do Millennials want to live? You guessed it: they live in the neighborhood where they want to spend their free time. If this concept is unfamiliar, see my post The Importance of Saturday Morning.
This phenomenon is occurring throughout the nation, and sometimes it only takes a cluster of food trucks.
If Only I Knew Sooner
In the latest apartment development cycle apartment developers have clamored to find the right location. Urban was the call of the day and with so many newly developing neighborhoods, finding the right location at the right land cost was and is tremendously challenging. If only an insight or a bell weather of the future desirability of a location was available.
In New York, knowing early that chef-driven restaurants in Williamsburg, Queens and Nolita would inspire growth and increased vibrancy in those neighborhoods would have produced outsized returns for apartment investors early to those markets. The arrival of notable new and inventive restaurants in Chicago’s River North and Logan Square precipitated a lot of the growth now occurring with the filling of office buildings and building of new apartments.
As a former resident of Los Angeles, I didn’t expect to return after a 10 year absence and have friends direct me to restaurants in DTLA (Downtown LA) and Culver City – locations I may only have previously ventured to buy a cheap couch. As I now venture through those neighborhoods, I certainly see a lot of tower cranes perched above soon-to-be completed apartment buildings.
In Austin and Portland it took little more than a restaurant outpost or even a cluster of food trucks to redefine neighborhoods. Austin’s East Side is home to East Side Kings and Thai-Kun– both located in a cluster of food trucks young people will cross a bridge leaving downtown Austin to try. Now they don’t have to, apartments are being built almost surrounding the food ‘pods’. In Portland, the opening of the acclaimed (and long-lined) Tasty n Sons nearly invented an apartment market in North Portland.
Opportunities in Seattle Abound
In Seattle you don’t have to look hard to find locations where great restaurants arrived much before the flurry of new apartment development and investment. Most of these neighborhoods carried a stock of historic buildings and low lease rates – the same catalysts for new restaurants we previously discussed.
Ballard is an obvious example, yet until recently a less obvious example is Columbia City. Interestingly, these locations are the only in our region that have a perfect overlay of both Urban Village and Historic District – interesting aspects to note when scouting future locations. In both, the forks came first.
Less obvious is Fremont/Wallingford’s Stone Way. Although boasting a prominent 7-Eleven, Stone Way had little appeal to apartment developers. Yet, in 2013 The Whale Wins & Joule made Bon Appetits’ Top 10 Best New Restaurant List. The pair are now joined by Manolin, another chef-driven concept – and about 1,000 new apartment units.
Where is the future for Seattle? It took two years and nearly 20 new restaurants, yet finally Pioneer Square is receiving the acclaim it deserves. Beacon Hill and Georgetown have pretty affordable rents and some gorgeous buildings. I have a few more in my back pocket as well.
Future installments of Follow the Fork are soon to come, covering additional topics I find interesting, applicable and insightful. I notice that every time I discuss “softer” real estate topics the click-rate on my weekly Market Update drops 1 – 3%. Maybe the promise of a few restaurant recommendations will help retain readership. Bon appetite!