McLeod project signals change in downtown scene; many may make way for more upscale eateries

Restaurants under the McLeod project umbrella have already begun to clear out. Peruvian restaurant Mixtura left two weeks ago. Sasi’s Cafe plans to be out May 3. World of Wrapps is long gone. And Italian-inspired Calabria is looking for a new home. The four are making way for a four-story, 157,000-square-foot mixed-use office and retail building along Lake Street South between the Bank of America property and 2nd Avenue South that recently gained approval from the city.

Pending the result of an appeal of the project, all nine remaining tenants in the space will need to be out by mid-summer when construction is expected to start.

But while all are moving because they have to, at least a few would have soon done so anyway, owners say.

“For a sandwich place, rents are getting too expensive to stay in downtown Kirkland,” said Sasi’s owner Roland Oberholzer, who expects his current rent to go up from $36 per square foot to $45-50 per square with redevelopment. With the high cost of buying a new property and Kirkland’s “strict” building and zoning codes, he said “no matter what, we wouldn’t want to get involved in building (a new Sasi’s Cafe).”

For now, he said he’ll concentrate on his catering business and another location in Kirkland’s Central Park tennis club.

Calabria owner Rhonda Roberti echoed Oberholzer’s view. Now looking for a place to relocate in the city, she said the average lease in Seattle is cheaper than in a “very expensive” Kirkland.

Despite the high price, however, she wants to stick around.

“We want to stay in Kirkland,” said Roberti, whose restaurant serves dinner entrees in the $11-15 range. “This is where our customers are.”

Of the approximately 45 restaurants in the downtown

Kirkland area, at least eight have closed or relocated in the last month or plan to do so by the end of the summer, and at least another four have soon-to-expire leases or occupy buildings up for sale. Those numbers are based on interviews, available real estate information and an assumption that the recently approved McLeod project goes ahead as planned.

Pasta Ya Gotcha, a chain restaurant that fills the niche between fast food and fine dining, is another downtown eatery along Lake Street South planning to leave by the end of summer. It sits across the street from the McLeod property.

Owner Chuck Hart said the move is a matter of simple economics: Rent prices are going up and earnings are dropping, and he can no longer afford to stay in the downtown. He said at one time his Kirkland location was a consistent revenue generator for the chain — Pasta Ya Gotcha also has locations in Seattle, Redmond and Bellevue — but in the last 18 months the restaurant has lost a quarter of its business. As a main culprit, Hart lists a downtown retail core that generates little foot traffic.

“With the (number of downtown) merchants that close at night, it’s just not restaurant friendly,” he said.

Hart also offered a view of downtown Kirkland’s future.

“In another two or three years you’re going to be hard pressed to find a place to eat dinner (in downtown Kirkland) for under $25,” Hart said. “I think what you’re going to find, and what you’re already seeing, is destination restaurants because of (rent) prices … Family priced places like us are going to be gone because we can’t afford to stay.”

Sentosa owner Juliana Lai agrees. Now on an expiring 10-year lease. Lai said the new terms she’s been offered are triple what she paid before. She said she would like to stay, but the new number might be too much to cover.

Bill Vadino, executive director of the Kirkland Chamber of Commerce, called the changes in the downtown restaurant scene part of a natural ebb and flow of a “volatile” business — a statement supported by a recent study at Ohio State University that found only about 40 percent of restaurants survive through their first three years of business.

Vadino also noted, however, a trend emerging downtown with higher-scale restaurants filling the spaces the Sasi’s and Pasta Ya Gotcha’s once occupied.

“Some of this is restaurant Darwinism,” he said.

One of those “destination” restaurants looking to move into the downtown is the Iris Grill, an upscale Issaquah bistro with dinner entrees ranging in price from $26 to $44. Owner Bill McIntyre said he’s now inquiring into the availability of a number of Lake Street locations, saying downtown Kirkland would be a “perfect fit” with all its new condominium development.

“Our restaurant is a littler higher end, and obviously people in those areas (downtown Kirkland) are higher income people,” he said. “We’d be a finer dining option that hasn’t been there for awhile.”

And that restaurants like the Iris Grill could fill the new gaps is not seen by all as a bad thing. Some, like Hart, say it’s just the nature of the business.

“I don’t know if it’s good or bad,” Hart said. “It’s just the reality of how things are with the property values.”

Sasi’s owner Oberholzer even supports the changes.

“Even though a lot of changes are going on, I think this is a good thing,” Oberholzer said. “Although it’s hard to accept that we have to leave, the fact is change is good in the downtown. A lot of older buildings are places that need updating. These newer places will bring new benches, trees, more people down here.”

Contact Jordan at jordan.lindstrom@kirklandreporter.com.