By Alison Stateman
Robert Ury, a vice president at RKF (soon to be part of Newmark Group), started his career in commercial real estate after graduating from USC Marshall School of Business in 2008 during the height of the recession. He joined California Commercial Partners in Newport Beach, where he had interned during college, and, despite the difficult market, fell in love with the business.
The economic malaise led to his initial focus on chain and franchise tenants, some of which were still expanding during the downturn. He got that break representing both the landlord and tenant for Octopus Japanese Restaurant in an 8,000-square-foot lease at 200 Pine Street in downtown Long Beach. More deals followed, as well as the call of Los Angeles, where Ury joined RKF in 2011 and has been ever since.
Ury, 32, is based at RKF’s office in Santa Monica and makes his home with his wife in nearby Westchester. Ury spoke to Commercial Observer twice in the last couple of months about the benefits of representing both tenants and landlords throughout Southern California and the rise of fast-casual dining and the hottest markets for retail in the region he covers, which spans from Los Angeles to San Diego.
Commercial Observer: RKF is being acquired by Newmark Group. What are your thoughts on the acquisition and has it impacted your role or work?
Robert Ury: I can’t speak to the deal, but I can tell you that things are business as usual at RKF.
You specialized in retail from the beginning.
Yeah. The company I was working with throughout the whole time in Orange County was strictly doing retail leasing. I was more focused on tenant representation than landlord representation and working with Flame Broiler and an AT&T wireless dealer, a nail salon called Profession Nails, Krispy Kreme donuts—nothing super fancy or amazing, but tenants that were expanding in a recessionary environment.
I had met a couple of the main partners here in this office: Robert Cohen and Rachel Rosenberg, who is no longer with the company. They had maybe five or six other brokers at the office at that time and all of them were older than me, but I still saw an opportunity to work pretty closely to how I did with my two mentors.
They had a clear focus on tenant representation, which was something I kind of gravitated toward, especially growing up in a recessionary market. It’s a more favorable position than representing a bunch of properties in which you might not have a lot of interest and you could be spinning your wheels and not having much luck with the asset so I chose to accept the offer from RKF in June of 2011.
On the tenant side, what has the biggest challenge been so far working in the retail space?
Having a specialty at that point in fast-casual restaurant representation. If you pick up a brand that is franchised, you could easily have five or six franchisees as clients under that one tenant’s umbrella. I found myself working on franchise businesses.
The cons were that I was dealing with a variety of different personalities and different points of contact under one actual tenant, and had to juggle multiple deals under the same tenant umbrella at the same time, and you have to sell the landlords on the financial capability of these franchises. I was able to get deals done and learn markets because these franchisees were looking all over Southern California, the Inland Empire to Orange County, San Diego, L.A. so that was giving me exposure to a variety of different trade areas and with every deal that you do you learn something.
The type of tenant base I had provided a great enough frequency of transactions, and these were 10-year leases so even if the tenant wasn’t paying a ton of rent, you’re getting paid on your deal and the commissions were adequate enough for me to sustain myself. Coming to RKF I was able to start working on other accounts like Pei Wei Asian Diner and Blue C Sushi, Pieology and Blaze pizza—a little bit of upper echelon of tenant and larger-square-footage tenant, some of which tend to be a little bit more corporate and a bit easier to work on and paying bigger rents because rents in L.A. County, especially in some of the better areas, are a lot higher than they are in Orange County and the Inland Empire. You put in the same amount of work or even less to make the deal and the payout is actually higher.
You have worked on expanding Mendocino Farms and also helping New York-based chain Sweetgreen enter the market. Tell us about them.
Mendocino Farms we’ve been working on exclusively for the last four years. We represent them from L.A. down to San Diego, including Orange County. We recently completed our third deal in Orange County for them. We did their deal in La Jolla. We did their deal in Del Mar and they just signed a lease for a new construction project called The Square at Bressi Ranch at Carlsbad, which is being developed by Shea Properties which will be anchored by a Sprouts Grocery store. We’ve done six deals for them overall.
Sweetgreen we’ve been representing for about two-and-a-half years. We’ve done nine deals for them in L.A. and we are in lease negotiations for our 10th deal.
Mendocino Farms and Sweetgreen seem like direct competitors. How do you manage representing both?
We are sensitive to representing tenants that could take the same space—on the other hand, we have to make a living. We really kind of deal with that on a case-by-case basis. We usually don’t try to work with two tenants in the same category that take the same type of space, especially if they are on the same phase of expansion meaning two tenants that are coming in from out of state that have a total blue ocean to open stores in, versus one tenant that might already have 15 locations here and then another one that’s in from out of state that has zero.
[Mendocino Farms and Sweetgreen have] very different expansion plans and strategic work. Mendocino Farms is typically 2,700 to 3,300 square feet with closed patio; Sweetgreen is typically 2,000 to 2,500 square feet. Sweetgreen doesn’t have sandwiches. Mendocino Farms—they are a gourmet sandwich market that does salads, but doesn’t have grain bowls. There is enough differential there.
I will say that in metropolitan L.A. it can get more dicey because you are doing more deals on the street instead of shopping centers but when you get out into the suburbs, you’re dealing with shopping centers where landlords typically grant their restaurants exclusivity in their food category.
How is this particular sector doing?
I cover a pretty significant trade area on the tenant rep side. For tenants, there’s a lot of interest in the Inland Empire. Our restaurants for example, even some of our fitness clients [like] Core Power Yoga, actually are more interested in expanding in San Diego County right now instead of Orange County. We kind of find ourselves hopping over Orange County and doing deals in San Diego.
What are retailers looking for?
The big trend in retail is tenants are shrinking their stores. They realize they have to act more like showrooms, instead of restock retail stores. A pretty popular range right now is 800 to 2,000 square feet and Abbot Kinney has a lot of spaces, mostly occupied, but in that size category range. It comes downs to lot sizes and history of bungalows and residential uses on that street. When you think at how the Third Street Promenade is an example of deep lots that are 120 to 150 feet deep which means the minimum storefront that tenants require is 20 feet at the bare minimum, most want to be 30 feet at least, you’re looking at 3,000- to 4,000-foot spaces at the low end.
That’s a major trend. The showroom element, that’s Bonobo’s, that’s Warby Parker, that’s smaller tenants like Monica + Andy [a baby and children’s store] who my company is representing out from Chicago. They’re going to be looking for space. They opened a couple of pop-ups in Macerich, in their malls. They have investors from the Bonobos team. It’s kind of what they call a guide shop. That’s an obvious trend in retail.
What work do you do on the landlord side?
I don’t want to pitch myself as only a tenant rep so I’ve always occupied 25 to 35 percent of my business with listings. We know markets, we know deal comps, we know what other landlords and other centers who they might be negotiating with—whereas a lot of brokers that only represent landlords don’t have that double-sided vision so to speak.
As for recent examples, myself, Robert Cohen and Kristin McCann were representing Topa Management Company, which is the biggest retail owner in Westwood Village, they own about 120,000 feet of commercial space. We recently completed our second lease in their portfolio. We’ve done a total of 6,100 square feet of leasing there, both restaurant-type tenants. The first of which is a concept called ROC, a soup dumpling concept; the second tenant we just sold a lease to is called Harvest Bar out of Sherman Oaks, an Acai bar, smoothie kind of concept.
We are also going to be taking to market an asset of Topa’s in Brentwood called Topa Plaza, which is at the intersection of San Vicente and Montana Avenue. We brought Mendocino Farms into that project—representing just the tenant—and, since then, [Topa] hired us to market the rest of the ground-floor retail.
For Spectrum, the Internet and cable company, they’re going to be rolling out a few of these larger-format, experiential-type locations, ditching the old office/DMV type of set-up. I’m not sure if you’ve ever had to bring your cable box into a Time Warner store, but it’s been a very bland process. They’re opening several of these types of locations to get in front of people more. In the age of the cord-cutters, [with] everybody relying on their smart TVs, I think they’re going to use the retail to help stay relevant, so that was an exciting deal. [RKF represented the landlord West Coast Investors.]
What are some upcoming restaurant trends you foresee in the fast-casual space?
I expect the trends toward automation and convenience to continue to grow, and for a new ethnic category to emerge in the fast casual space. The rising wages in California are a huge contributing factor. Restaurants can only raise their prices, so cutting the number of people on payroll at a given time is a logical way to combat rising wages as a business owner. While restaurants relying on robots and/or artificial intelligence have taken off in other cities and even other countries, no group has executed this successfully yet in Los Angeles. The keys are to infuse enough of a human element into the hospitality side of the experience and to avoid making people feel like their meal just came out of a machine. There has to be a happy medium out there somewhere.
On the convenience point, people continue to have less free time in this age of devices, but everyone has to eat. I expect consumers to grow more used to shorter lunch breaks, meals delivered to the office, or relying on grab-and-go options for weekday lunch or dinner. Regarding different ethnic cuisines, the most recent trend has been Mediterranean; prior to that, Italian via fast-fired pizzas and Mexican—think Chipotle and Qdoba—before that. Another category of quickly-growing concepts will emerge. It’s been difficult to execute Asian cuisine in a healthy, scalable fast-casual fashion but maybe that will be next.