Texas Restaurant-Retail Landscape Is A Hodgepodge Of Despair And Opportunity

With Texas restaurants and retailers operating at 75% capacity levels again, the hospitality industry is beginning to see glimmers of light after a massive commercial real estate shutdown. 

"There are a handful of [retailers and restaurants] that are back to 80% to 90% of their pre-COVID sales," Triten Real Estate Partners principal Ty Lee said on Bisnow's Texas Retail Renovation webinar.

Those faring well are generally operators with outlets in top-notch locations and those who have successfully pivoted to curbside and mobile to-go services, Lee added.

Commercial real estate experts appearing on the webinar noted rental rates in the sector edged lower in recent months, offering some relief to new tenants, but overall occupancy remains steady due to ongoing construction suppression in the retail space over the past few years. 

And with many Texans dying to get out of the house, Lee remains cautiously optimistic that brick-and-mortar stores and restaurants, which are already seeing upticks in demand, will see a surge of business when people feel safe. 

But Texas' nascent retail-restaurant recovery is not necessarily equal across the entire state. 

On on hand, fast-casual restaurants, dentists, grocery stores, medical-related tenants, furniture retailers, pizza shops, coffee operators and fitness outlets are already showing signs of optimism, with tenants in these categories searching empty spaces hoping for price discounting, the panelists said. 

"In the retail landscape right now, we are starting to see some activity pick up, which I think has been great," Transwestern Senior Vice President Crystal Allen said. "The transactions haven't been happening for the last few months, and we are now starting to see where a lot of paper is being traded and people are starting to expand."

But when retail and restaurant experts look outside high-demand categories like grocery and casual dining, challenges remain, particularly for entrepreneurs in the restaurant space. 

Independent restaurant owners continue to struggle and will remain at the precipice of destruction for as long as government aid programs, like the Paycheck Protection Program, are at risk of running out without the addition of new relief, Texas Restaurant Association Chief Revenue and Innovation Officer Anna Tauzin warned. 

"Unfortunately, 71% of Texas restaurant operators say they don't anticipate sales will return to pre-COVID levels in the next six months," Tauzin said.

Many are worried about survival in that time period.

The best way to keep independent restaurants going is to ensure landlords and real estate brokers are working with restaurant tenants to offer any available relief, or at the very least, to help their tenants lobby for government support, Tauzin said. 

The trade group executive said it's the independent restaurant and full-service dining concepts that truly drive U.S. retail activity at the local level. 

"It's great to sell wins in the QSR [quick-service restaurant] category and with national brands that are expanding, but you wouldn't propose to your girlfriend in a quick-service restaurant," Tauzin said.