The downtown Des Moines housing market is poised for growth. Will restaurants follow?
Friday, November 29, 2013 7:00 AM
In the coming years, if an individual wants to live downtown, there will be plenty of places to call home.
Downtown's newest dining options
Restaurants that have opened in the past year or two:
- New World Cafe
- Wasabi Tao
- Mad Meatball
- The Riverwalk Hub
- Exile Brewing Company
- Akebono Japanese Restaurant
- Las Americas Mexican Restaurant
There are 1,500 housing units currently in the works for downtown Des Moines, a more than 25 percent increase to the area’s 5,300 existing units, according to Glenn Lyons, president and CEO of the Downtown Community Alliance.
Housing, along with the redevelopment on Walnut Street, a rebirth in the Western Gateway Park area and the East Village’s Market District and a host of other major projects, is leading to a ton of optimism for development in downtown.
But will the influx of new residents, added to those who already live and work in downtown Des Moines, encourage growth in downtown Des Moines’ restaurant scene?
It can and it should, Lyons said. The real estate will be there for those who are looking for restaurant sites.
“Anyone who lives downtown is likely to spend four times as much on food, drink and personal services as those who simply work downtown,” Lyons said, adding that with the influx of housing planned for the downtown area over the next five to 10 years, it could be possible to see a 20 percent increase in restaurants.
Some of that growth is already occurring. According to Jessica Dunker, president and CEO of the Iowa Restaurant Association, at least eight restaurants have opened in the downtown area in the last year or two.
And more are planned. This spring, Orchestrate Hospitality will open MALO in the former downtown firehouse at 900 Mulberry St., which is being refurbished by the Des Moines Social Club. Tonic, a bar with a location in West Des Moines, will open on Court Avenue.
How fast the potential growth happens, and how much growth occurs, may prove more difficult to predict, though.
LOOK HOW FAR WE’VE COME ALREADY
In order to see which direction the restaurant scene is moving, it’s important to understand its rocky past.
Twenty-five years ago, downtown Des Moines might have been called a ghost town. In the late 1980s, there was no such thing as a downtown restaurant scene. It was a Monday-through-Friday town, according to Paul Rottenberg, who moved to Des Moines 26 years ago to work at Michael LaValle’s City Grille.
“You could shoot a cannon through downtown on a Saturday and not hit anything,” said Rottenberg, who is now president of Orchestrate Hospitality. “People would come stay at the Hotel Fort Des Moines and walk out on Saturday morning and think there had been an apocalypse. There wasn’t a heartbeat anywhere near 10th and Walnut.”
The downtown restaurant scene moved through what Rottenberg called “some dark years” in the 1990s.
During that time, Court Avenue Restaurant and Brewing Co. opened in 1996. Scott Carlson, who was operations manager before taking over ownership of the brewpub in 2001 with partner Lloyd Linn, was there to see it.
“We opened the brewery in 1996 expecting it to look like it does today, only in 1998,” Carlson said. “We saw great potential in Des Moines - Des Moines just wasn’t quite ready to reach that potential.”
But it did reach it.
The floods of 1993 gave downtown Des Moines a chance to start over. The city of Des Moines came up with a redevelopment plan that Rottenberg called “excellent city planning.”
“It was a great blow to public cynicism because it was one of those times you paid someone a bucketload of money, had years worth of meetings and it worked,” he said. “They came up with a plan and they stuck with it. The corporate community got behind it and it all worked.”
A key component of that redevelopment was the restaurant scene, Dunker said.
“It was a commitment by many people to make Des Moines culturally relevant and interesting,” she said. “Then all of the sudden, there was this influx of fantastic, locally supported, independent restaurants. The community chose to support this model.”
During that renaissance, key players started to emerge in the downtown restaurant scene, including Rottenberg and his now business partner, George Formaro, whom he met and worked with at City Grille. Together, the pair opened Centro in 2002, their first of several restaurant ventures.
“Around that time, we were one of the few places that was able to stick around,” Rottenberg said. “Then other chefs started opening high-quality restaurants at the same time the redevelopment plan was working, so around 2000, it all came together.”
Today, 147 independent restaurants and bars operate within a 2-mile radius of the Ruan Center at 666 Grand Ave., according to the Iowa Restaurant Association. Including franchises and chain restaurants, there are roughly 170. This area encompasses the East Village, Western Gateway and Ingersoll neighborhoods.
Dunker said Des Moines is definitely on par with the downtown restaurant scenes in other cities of similar size. Where Des Moines differentiates itself, however, is in the variety and caliber of restaurants offered to diners.
“In a food world increasingly dominated by chain restaurants, Des Moines has been able to rebuild its downtown entertainment districts on the vision of creativity of local entrepreneurs, proving that if you have a unique offering, great service and the right ambience, there is always room for another concept,” Dunker said.
The downtown restaurant scene has remained fairly franchise-free. It is a place, Carlson said, diners come to have “an experience.”
“I think folks are realizing that if they want to do something unique, downtown is the place to do it,” he said.
WHAT GROWTH SHOULD LOOK LIKE
Should the downtown restaurant scene continue to grow? Lyons says yes, adding that it’s important for the restaurant scene to continue to expand in order to meet the demand from the growing number of residents who will call downtown Des Moines home.
“Additional restaurants will add more variety and more competition, continuing to make downtown a destination for dining,” he said.
Catching those who work downtown will be just as important as future residents.
“We need twice as many restaurants downtown; we just need to find a way to fill the seats,” Lyons said. “Finding ways to entice them out at lunch, developing a breakfast trade, getting people to stay after work and not just for a drink. Tapas, grazing - we don’t have a lot of that going on yet.”
Restaurant owners, including Rottenberg and Formaro, said although there is room to grow, it needs to be a steady, natural process. Too many could cannibalize the restaurants that already call downtown Des Moines home, Formaro said.
“When you start to say things like we could use twice as many restaurants, that gets a little scary,” Rottenberg said. “Visualizing Walnut Street, we all want to get it done, but it’s kind of steady as she goes. You have to build and absorb, but if you overdevelop, everyone goes down.”
Carlson says the more restaurants, the better.
“A rising tide raises all ships,” he said. “The more restaurants and bars there are, the more you compete. The more you compete, the more you raise the bar. I think it just makes you better.”
However, he agrees development should be a conscientious and thoughtful process.
“City leaders need to make sure economic choices aren’t made in bubbles,” Carlson said. “What they think is great can sometimes break the creativity and the natural growth of things. When things spark, it’s better to see them start to slowly burn bright.”
FINANCING NEW RESTAURANTS
The ability to secure financing also has been a challenge for potential restaurant owners, Dunker said.
“People see restaurants as risky ventures, and there’s a misconception nationally that 90 percent of restaurants fail in the first year. That’s completely untrue,” Dunker said.
According to the Ohio State University website, a longitudinal study of restaurants in Columbus, Ohio, found the failure rate for restaurants was actually 57 to 61 percent for a three-year period (1996-1999) – still high, but much more in line with other types of businesses, according to H.G. Parsa, author of the study and associate professor of hospitality management at Ohio State University.
“If the Des Moines community wants to continue to have that unique, independent restaurant growth, the city might need to look at ways to address and support the financial piece of it,” Dunker said.
Steve Simon, market president for Central Bank in West Des Moines, said he is no less likely to lend money for a restaurant than any other business.
"There are companies with good capital and management and business plans. There is good business in any industry and you just have to pick out the right one," he said.
But there is little question that restaurants can pose more of a risk to lenders, said Joe Folsom, district director for the U.S. Small Business Administration in Iowa.
Many Greater Des Moines lenders will provide financing for restaurants, providing they have the SBA acting as a backstop in case the loan sours.
Folsom said people new to the business sometimes fail to understand the long hours necessary to make a restaurant a success. Someone expecting an 8 to 5 experience need not apply.
"It is different from just cooking food," he said.
In fiscal year 2012, the SBA financed about a dozen restaurant operations with operating and startup loans that ranged from $4 million to $10,000. These included franchises and "mom and pop" operations, Folsom said.
To Lyons, driving those who work downtown out of the office during their lunch hours would increase business for existing restaurants and could encourage more competition. Although the Downtown Community Alliance hosts Lunch Unplugged in the winter and the Wednesday Farmers Market in the fall to get people out at lunch, he feels more quick lunch spots are needed.
Lyons also predicts that with the redevelopment of Walnut Street, downtown will see more sidewalk cafes. Farm-to-table fare will continue to rise, as will ethnic and fusion options.
“What spurs more restaurants are more choices, which makes you want to eat out more,” Lyons said.
Rottenberg said it’s hard to predict the future of the downtown restaurant scene. How it grows, he said, will be contingent on how downtown development continues to unfold.
“It will all happen in due time,” Rottenberg said.
Who is growing
This spring, Orchestrate Hospitality will open MALO, a 6,500-square-foot restaurant that will dabble in Mexican, Latin American and Tex-Mex cuisine. The restaurant will be housed in the former downtown firehouse at 900 Mulberry St., which also will be home to the Des Moines Social Club.
“We’ve been working on this project for close to 10 years,” said chef and restaurateur George Formaro. “It’s been in my head even longer. It’s really something I’ve always wanted to do.”
Paul Rottenberg, president of Orchestrate Hospitality, said that although a lot of components under the hood will be the same, the experience MALO will offer downtown Des Moines diners will be different from that provided by the company’s other locations, including Centro, Django and Zombie Burger + Drink Lab.
“If you look around the city there are different approaches to developing restaurants,” Rottenberg said. “Many present with their food, but what George does is create a world and an environment to walk into. There’s a place for both, which is why I think the city is developing so nicely.”
Not far away in the Western Gateway, Carlson opened his second restaurant, Americana Restaurant & Lounge, in May 2012. While Court Avenue Brewing offers what Carlson calls comfort food, Americana is more contemporary cuisine that is still Midwest-friendly.
Carlson also took advantage of an old space, respecting its history as Americana came to life.
“People still like to go out and have a meal, and when they do, their expectations are high. Their dollars are more valuable, and all of the sudden, they become a little more choosy,” Carlson said. “At Americana, we wanted to make sure you felt something. That’s why we invested in the building and care about the atmosphere you’re in.”
What the Des Moines restaurant scene is doing right
Glenn Lyons, CEO of the Downtown Community Alliance, said downtown restaurants today offer more and better choices for diners. Chefs are experimenting with menus, and customers are responding well. Farm-to-table fare is on the rise, and restaurant owners are also venturing into mostly uncharted waters in downtown, such as the Western Gateway Park area, to open new locations.
“Tastes are changing in the Midwest,” Lyons said. “Today, we do more than the pork tenderloin sandwich, thank you very much, and that’s a good thing.”
Formaro said he believes there isn’t a single demographic excluded from the restaurants offered downtown.
“There’s a mix of everything here, and there’s a place for everyone,” he said. “It feels like an exciting place.”
The history of the buildings in downtown Des Moines and a commitment to honor it also has kept restaurant and bar owners downtown, including Full Court Press Inc., a company responsible for such venues as the Royal Mile, El Bait Shop, Sbrocco and High Life Lounge. Full Court Press’ first project was the Royal Mile, which opened in 2001. The company has averaged one new business per year since the Royal Mile opened, said Jeff Bruning, owner and marketing director with the company.
“The buildings are unique and don’t have that cookie-cutter, strip mall feel,” Bruning said. “I think it gives you instant street cred in a way. To have perfectly carpentered areas, in my mind, is not appealing.”