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Stephen Pleines
Founder and principal, Eastern Land Co.
Age: 32
Industry experience: 8 years
After a stint as a professional snowboarder following his graduation from University of Boulder, Stephen Pleines was ready to settle into his permanent career. Growing up as the son of a top real estate manager for Thompson Financial Services, commercial brokerage was a natural next step. He began his real estate career at Boston Properties and The Dartmouth Co. before founding Boston-based Eastern Land Co. in 2018. The Newbury Street brokerage represents such tenants looking for new locations as ATI Physical Therapy and juice bar CocoBeet, along with landlord representation.
Q: While COVID-19 has dealt a big hit to the restaurant industry and forced many closures, there’s been a number of new leases and openings as well in recent weeks. Are these deals that were negotiated pre-pandemic, or are landlords offering terms that are too good to pass up?
A: It’s kind of split. There’s still a fair amount that were negotiated previously. We started working on Foundation Kitchen [coming to The Graphic in Charlestown] around this time last year. It’s hit-or-miss as far as the restaurant operators being opportunistic. There’s a handful of groups that are in a good position with the landlord, or their landlord might be partners with them in the restaurant. That’s not uncommon. Or they own their own real estate.
Q: How widespread is the switch to percentage rent or shorter leases?
A: You hit the nail on the head. I wouldn’t say the market’s totally changed, but we’re going that way as the retail industry as far as shorter terms, shifting toward more integration of percentage rent. Tenants want less space than they did five years ago on a massive scale, whether you’re a fast-casual restaurant or a shoe store. You don’t need 800 square feet of back–of–the–house storage to store shoes. The fast-casuals are realizing they don’t need 30 seats in an 1,800-square-foot restaurant. They can do 800 square feet and most of the sales are takeout. The landlords who are on the fence are going to have to warm up to this in the post-COVID era and get more creative.
Q: What about asking rents? Are they falling significantly?
A: Minimally. And personally as a broker, I feel that’s probably the best thing for the market – If we can find other ways to provide concessions. The way it’s supposed to work is rent is supposed to be a factor of the sales that are generated out of that space. At the end of the day, it’s good we haven’t slashed prices. There’s other forms of concession, and Boston is an expensive city to do business in. Cutting your rent by 15 or 20 percent probably still isn’t going to be enough that this tenant who may otherwise be interested is going to take a breath and sign a lease.
Q: Is there a blending of retail and industrial space as demand decreases for the former?
A: Walmart is experimenting with taking the 120,000-square-foot box they traditionally plop a store into and saying: why don’t we take 30,000 square feet and use it as a fulfillment warehouse. They’re taking their back-of-the-house operations and integrating them into their physical space, which is funny, because it’s the opposite of the shoe store. We’re going to see that in the food business too. Maybe a bakery wants to open three 1,000-square-foot locations, maybe they’ll have one 3,000-square-foot location and do a commissary. If that works, they can open additional satellite locations and the commissary can support that. It was starting to move in that direction anyway.
Q: Are there differences in strategy negotiating with mom-and-pop landlords as opposed to the big developers?
A: Absolutely. One thing I appreciated while working at The Dartmouth Co., and that I embody in my business now, is the differences in the firms like us and the big ones like JLL and Cushman & Wakefield. When you’re on an office team on [Interstate] 495, you’re working on nothing else. We work with everybody, whether it’s the guy who never graduated high school but owns five buildings in the South End, to Boston Properties. That is one of the fun parts about retail. The local stuff can turn into the Wild West. You have to be more creative and convince unconvinceable people more than you would on a corporate deal.
Q: All things being equal with a tenant’s credit, which formats do landlords look at as the desirable ground-floor tenant and which are a hard sell?
A: The ax-throwing wouldn’t do so well in the residential areas. Everyone wants a local tenant with multiple locations or a company that has some cachet and a cool and unique concept. When I was at Dartmouth Co., I helped with the rollout of Sweetgreen. People say, “Oh, this is new. They’re health-oriented.” That’s what a lot of landlords are interested in. We push it back on the landlord and say, “What do you want? Is it credit? Do you want a bank? Do you want the local cupcake operator who everybody loves, but doesn’t have credit?” They want all of it, with something in-between. In a small town, I would probably be looking for a real estate office or a hair salon. Something that’s simple and not heavy wear on the building.
Q: What neighborhoods have the brightest prospects for retail growth?
A: The Bulfinch Triangle is a good one to keep an eye on because of the One Congress project. I think that will make a difference. South Boston and Somerville are great. South Boston is locally driven, the rents aren’t super high, and the locals are hard–core about supporting the community. The nationals don’t understand it, but they want to be in there. Somerville is the same thing. Those two neighborhoods have proven themselves to be positive places to get leases done.
Pleines’ Five Favorite Retail High Streets:
- Newbury Street, Boston
- Abbot Kinney Boulevard, Venice, Los Angeles
- Ledbury Roadd, Notting Hill, London
- Elizabeth Street, Nolita, New York
- Rue du Rhone, Geneva, Switzerland
