“Once you figure out how to workaround the bank vault and the installationof restaurant equipment and fixtures, theexistence of a drive-through will help thepermitting process for a retrofit to a restaurant,” says Noah Shaffer, senior director ofasset management for Confidant AssetManagement.
If banks don’t become restaurants, theycan also work as medical or general officeand retail space, such as cellular stores orfuneral homes, according to Shaffer.Regardless of the use, they are usuallyattractive options for tenants.
“Somebody else will want to be in a
decently well-profiled location,” Shaffer
says. “They’re usually in a nice-looking
building, with high-quality building materi-
als, in a retail corridor, but the new tenant
is just not going to pay the same rent as the
bank would. But we typically see some res-
taurants and then maybe general retail,
such as a cellular store or something along
those lines move into those spaces.”
This is not to say that there is a wholesale
rush to drive-thru space.
“We’ve had a lot of conversations with
tenants who are beginning to think along
those lines, but they’re just not making that
call yet,” Shaffer says. “They aren’t actively
reaching out and saying like, ‘Hey, we’ve
figured out that this is what we’re going to
do. Let’s sign the lease because we’re going
to do a drive-through mattress pickup store
now. I think every tenant who is contem-
plating a shift in real estate strategy still has
seven or eight ideas on the chalkboard, but
they haven’t figured out exactly what strat-
egy to execute going forward, and there is
going to be a lot of speculation.”
But Shaffer expects a lot more interest in
drive-thrus over the next few years.
Other restaurant chains are also rollingout more drive-thrus. “Panera was doing apretty big roll-out plan, moving fromstores to drive-thrus,” Shaffer says. “Thoseare different stories and are on the fasttrack. Maybe they were trying to do drive-thrus at 10% of their stores a year. Now itmay be 25%.
Regardless of what tenant moves intoretail space, many landlords who lease tobanks will soon need new tenants. Theymight be pleasantly surprised at the rangeof options.
BLACKSTONE’S INTEREST IN
SELF-STORAGE
In October, Blackstone Real Estate
Income Trust announced it would acquire
Simply Self Storage from a Brookfield
Asset Management real estate fund for
approximately $1.2 billion. Simply Self
Storage is one of the top five private own-
ers of self-storage and operates a portfolio
totaling eight million square feet across
the US. BREIT, for its part, owned a $300
million portfolio of self-storage facilities,
and with the acquisition it became the
third largest non-listed owner of storage in
the US.
As is usually the case with Blackstone, theacquisition caused investors to give self-storage a second look. What they found wasan asset class that shone throughout thepandemic.
One of those investors is Buchanan
Street Partners, which launched a self-stor-
age investment platform with plans to buy
$350 million to $500 million over the next
five years. “As we expected, self-storage has
continued to perform very well during the
pandemic, further reinforcing our invest-
ment strategy,” according to Timothy
Ballard, president and CEO at Buchanan
Street Partners. “The pandemic reaffirmed
the belief of self-storage being a recession
resistant sector.”
The demand is driven by heightened
consumer interest in storage facilities,
which have led to strong occupancies.
“With consumer demand at an all-time
high, the sector appears to have proven
that it is a need among consumers,” says
Feerooz Yacoobi, VP at Buchanan Street
Partners. “That’s why in terms of occupan-
cies, we’re seeing same store pools among
the REIT operators at an all-time high, in
the mid-95% range. We think this sector
will continue to weather the storm.”
These problems are actually not due to
slowing demand during the pandemic but
rather overbuilding issues throughout the
last two years. “We’ve seen overbuilding as a
lot of new product was delivered in 2018
and 2019. That has negatively impacted
market rates, but rents are now starting to
pick back up in certain trade areas,” says
Yacoobi. “As noted, we think those are inter-
esting opportunities to come in and acquire
“THERE REALLY IS AN INTERESTING DYNAMIC GOING ON ACROSSCOMMERCIAL REAL ESTATE.”
SAM ISAACSON
PRESIDENT OF WALKER & DUNLOP INVESTMENT PARTNERS
