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October 2, 2023 Deal Watch

Starbucks, Chipotle emerge as anchor tenants in new CT retail developments

RENDERING | CONTRIBUTED A rendering of Starbucks and Chipotle restaurants planned for a new commercial development in South Windsor.

Numerous retail developments around Connecticut are following a trend in which Starbucks Coffee and Chipotle Mexican Grill restaurants are built next door or near each other.

Industry experts say the two establishments aren’t a package deal, but they are enticing to landlords and developers seeking growth-oriented tenants with high credit ratings.

Signing either brand as a tenant — or better yet, both of them — could help developers secure project financing, even at a time when lenders have tightened credit availability amid rising interest rates and continued uncertainty around brick-and-mortar retail sites, experts said.

Tim McNamara

Timothy McNamara, a senior director at brokerage firm Cushman & Wakefield in Hartford, has been representing Starbucks developments in Connecticut and New York for more than a decade, securing locations for 50-plus coffee shops that typically feature quick foods and a social cafe atmosphere.

Numerous new Starbucks locations have been proposed, built or are under construction in Greater Hartford, he said, including in Ellington, Simsbury, Glastonbury, South Windsor, Newington, Berlin, Wethersfield, Windsor Locks and Cheshire. Several of those sites also feature a nearby Chipotle.

One of the newest proposals is from a Massachusetts developer who wants to build a commercial complex near South Windsor’s Promenade Shops at Evergreen Walk — at Cedar Avenue and Buckland Road — that would include a Starbucks and Chipotle.

A Bristol property, at 1444 Farmington Ave., recently tripled in value in just one year, after a developer demolished a former Ruby Tuesday restaurant building to make room for two smaller commercial properties that host a Starbucks and Chipotle, respectively.

Developers recently received approval to transform the former Wagner Ford dealership site in Simsbury, at 1263 Hopmeadow St., into a commercial center that will be anchored by Starbucks and Chipotle restaurants.

McNamara said there are many Starbucks and Chipotle projects on the horizon because both companies are actively looking for new development opportunities in underserved communities with drive-thru capabilities.

Growing footprints

California-based Chipotle, founded in 1993, reported $8.6 billion in revenue in fiscal year 2022. It has more than 3,200 locations throughout the U.S., including 34 sites in Connecticut, according to its website.

The fast-casual maker of bowls, tacos and burritos said it plans to open more than 255 new restaurants this year, with a long-term target of 7,000 locations in North America.

Seattle-based Starbucks Coffee, founded in 1971, recorded $32.3 billion in revenue in fiscal year 2022. It has more than 37,000 locations globally, including 16,144 in the U.S., and more than 130 in Connecticut.

Comparatively, there are around 485 Dunkin’ coffee shops in the state, leaving Starbucks room to grow.

Chipotle and Starbucks are often co-located because they cater to a similar clientele and have respect for each other’s product, McNamara said.

“Both run strong operations, have strong followings, both are good-credit tenants that landlords want,” he said.

Meantime, as more communities get their own Starbucks, the company is adapting to changing consumer needs.

New Starbucks developments have a variety of setups, including the traditional cafe that typically features a drive-thru window for ordering and pick-up.

A project on the Berlin Turnpike in Wethersfield approved earlier this year was set to be Connecticut’s first Starbucks with a walk-up window just for mobile orders.

A development in Stamford that is under construction is set to be one of the first Starbucks stores offering mobile-order pickup only, McNamara said, which is a new growth avenue for the company.

Another project in Waterford will also feature a drive-thru and walk-up window, McNamara said.

Design prototypes

Jack Hayes

Jack Hayes, director of development for commercial real estate firm SullivanHayes in Farmington, said Starbucks and Chipotle want to be located in high traffic areas that are easy to get in and out of.

Both companies conduct extensive data research to show where their customers are, and where new developments would be successful, he said.

Now that they are more established, they are also able to venture away from standard restaurant design prototypes.

Most Starbucks developments are new builds with a very specific look, but not always. For example, a developer is renovating a vacant plaza on Farmington Avenue in Berlin to accommodate a new Starbucks location.

Hayes said companies like Starbucks used to be more strict about their store designs.

“These days, they’re much more willing to work with landlords and come up with a design that the landlord likes and (the company) likes,” but is similar to their prototype, he said.

Still, it’s easy to identify most Starbucks and Chipotle restaurants, whether they’re next door or by themselves.

“They’re not necessarily a package deal,” Hayes said. “When you see them together, it’s because they both individually see an opportunity to grow.”

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