Every industry has its own mini-lexicon. Why shouldn’t it? These neologisms might originate from journalism, where they achieve enough prevalence to become mainstream: e.g., the press’s notably unecological use of the word “ecosystem”, the cringe-inducing phrase that begins “help me unpack…”, or the use of “ask” as a noun. The US Department of Defense has enough of them that it ventures amazingly close to cryptology, non entirely unintentional; after all, a single branch of the military creates on average one new acronym or specialized term a day.
So why should real estate brokerage exclude itself from all that jargon-y fun? I’m not talking about terms like “triple net” or “fee simple”—fixed words reflective of finance that people learn in business school. It’s the buzzwords—the innuendo-laden phrases that signal either a euphemistic or pejorative context, which those in the know deploy comfortably. And good real estate agents are always in the know. Anyone in the market for a new home (whether rental or purchase) is probably better attuned than I am. But I’m thinking of phrases like “up-and-coming neighborhood” or “great renovation opportunity” or the perpetually popular “luxury” for any and all rental properties built within the last two decades. These terms at least represent the tip of the iceberg for residential real estate.
But what about commercial real estate? Here’s a term I recently saw in an (ahem) up-and-coming neighborhood in Washington DC:
Having never seen “second generation” before, I had to do some research. While I’m not yet certain I’m behind the times in my unfamiliarity, I suspect it’s an emergent buzzword. We’ll see more of it in the future. Does second generation mean exactly what we might expect? If you’re nerdy like me and get excited every time you stumble upon the telltale orange paper indicating a new occupancy permit, moments like this become learning experiences.
This space in particular used to host Gordon Biersch, a restaurant-brewery chain with over a dozen locations as recently as 2019. The COVID-19 lockdowns devastated CraftWorks Holdings, Inc., the operator that had long managed Gordon Biersch and a few other more familiar names (Rock Bottom Brewery, Logan’s Roadhouse). Forced into bankruptcy protection at the begin of the pandemic, CraftWorks reduced its locations, cutting Gordon Biersch to just seven remaining. Washington DC got the axe; the high-profile site near the Navy Yard WMATA Metro station has been vacant for two years. What’s going in its place?
The provocatively named Pink Taco, a micro-chain ostensibly with locations in four major cities, christening a fifth site in DC this spring. (And, yes, like many emergent restaurants with an eye toward geographic expansion, it likes to refer to itself as “local”.)
So, what to expect from a second generation location? After poking one’s nose in the window for just a few seconds, an answer.
A significant portion of the infrastructure left from Gordon Biersch remains: the cushioned benches, the below-grade floor space with ADA compliant wheelchair ramps, which (I’m guessing) allow visitors to survey the entirety of the premises, endowing them with a sense both of familiarity and, as a result of that familiarity, some psychology control over the setting. It’s comfortable and personable, not overwhelming. Restaurant infrastructure is what makes the location more appealing to any successors. But those are all abstractions, soft selling points from a commercial broker’s perspective. Here’s the real infrastructure:
It’s bar space, which includes a bar counter that is likely still in excellent condition, with pipes and pressurized tubes underneath—the plumbing of an effective barroom sink, and a handful of functional beer taps. I’m not sure it’s that difficult to install draft beer paraphernalia, but it’s undoubtedly an expense that a ascendant restaurant chain would prefer not to incur. Meanwhile, plumbing unequivocally carries a hefty price tag. But all of these features place the old Gordon Biersch site at an advantage. No need for the owner to strip the space back to concrete floors and wall studs; as long as it’s willing to settle for the existing interior layout, a second generation restaurant like Pink Taco can reclaim it with far lower up-front investment.
And this is precisely what the commercial brokerage and property management firms were hoping would happen: after one restaurant tenant leaves, another one comfortably slides into place. It wasn’t this way just twenty years ago, or even in the early 2010s; back then, a prominent corner space in a bustling, high-density area could have just as easily gone to a merchandise-based retailer: a drug store, a pet supply store, a mini-grocer, maybe even a specialty apparel store. (It was smarter to return the site to tabula rasa; none of this second generation nonsense.) These retailers all still exist, and all are available in the Navy Yard neighborhood, but they comprise a much smaller percentage of retail tenants than in the past, especially the clothing shops. Restaurants/bars/coffee shops are now almost the default tenant, with group specialty sports/wellness (pilates, yoga, barre, spinning, kickboxing) most likely the second most prevalent category. Both of these businesses essentially help foster social engagement in a way that a drug store or an apparel store does not. In fact, it is the young up-and-coming chains that are gorging on the priciest retail spots, while older, legacy chains that first prospered in suburbia get pushed to the margins. And restaurants (bars, breweries, distilleries) are the business type most in demand among the disproportionately young, childless, white-collar, often swingin’ single contingent that dominates the Navy Yard neighborhood.
Exactly the type who won’t squirm uncomfortably when saying the business name “Pink Taco”. It’s the ideal second generation tenant. The next generation, if you will. May it live long and prosper.
8 thoughts on “When catastrophe wipes out a family of small businesses, the second generation must rise from the ashes.”
I clicked on the hashtag, and I almost didn’t get it–took me more than five minutes. But my hat comes off for you now, good sir: you read to the very end!
This seems to me the commercial version of “filtering”.
Sounds like an apt description. Curious to know what the original use of the term is upon which your “filtering” is based…
It’s a win-win for the property managers. Because so much of the first-floor retail market is already cued up for restaurants, the owners/managers feel no obligation to strip the old space down to studs and cement floors, or even to remove the centrally located plumbing, which would be an unusual and incongruous feature for most merchandise retailers. So they retain it all, then market it as “second generation”. And they can charge higher leasing rates, which is still a pretty good deal for the next restaurant tenant: in this case, the successor restaurant faces fewer up-front costs in getting the place into a suitable appearance for the Pink Taco brand.
Restaurants, bars, coffee shops, specialty sports/wellness locations all represent personal experiences, while merchandise establishments are impersonal exchanges of goods. The former will continue to grow at the expense of the latter. Thanks Amazon! 😝
Pretty much! In this day and age, about the only shopping that is likely to survive are highly aestheticized touristy centers focused precisely on tourist-oriented shopping. But in that sense, it’s more of an experience and potentially a social engagement. Meanwhile, the more utilitarian shopping of malls can easily be replicated completely through online companies.
Is this space “ready” as Pink Taco? You should re-visit the space when it is opened as the new tenant. It would be interesting to see how much the second generation tenant changes or does not change.
These photos are very new–less than a week old. I don’t imagine there’s a huge amount of change yet. But I can investigate in late spring when it’s supposed to open. The thing is, I never went to the Gordon Biersch, so aside from peeping through the windows after it closed, I don’t know if I’ll be able to base it on much of a recollection! That said, I’d be very surprised if the central bar area changes locations; that would be a huge expense.