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How licensing and inventory impact restaurant sale prices in LA

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Value of Licenses

Commercial real estate investors looking to buy restaurants in Los Angeles may find selling prices high while the restaurants themselves say the cost is justified if licenses, including the liquor license, are current.

Commercial real estate agent Peter Silvester says the inventory is low and this pushes prices up.

“There’s not a lot of inventory and what is available comes at a high cost.”

He’s noted that restaurants for sale may have seemingly high prices regardless of cash flow and buyers should understand the licenses are an asset.

“If you don’t have them and you open a restaurant, you’re either going to spend many months or over a year to get the licenses and risk large payments to city officials.”

Value of Neighborhoods

Peter, an agent with Keller Williams, told me the rule of “location, location, location” that governs real estate pricing definitely applies to commercial retail properties and restaurants.

“The business has to be in neighborhoods that make sense like downtown LA with developments that include South Park, Culver City, and parts of the San Fernando Valley.

“There are onerous restrictions in Santa Monica and I advise clients to not buy in Westwood because of the struggle of trying to bring people back to the neighborhood there.”

Peter said he took clients to look at spaces but he has yet to see any substantial new improvements other than a grocery store and Target.

“That will add some anchorage but it’s not enough to make it consistent foot traffic.”

Value of Hollywood

Many of Peter’s clients work for overseas investors who are starting up in California and the U.S. He says the challenge of matching buyers with properties includes landlords looking to lease to national brands.

“My clients have to win over landlords. There’s an awesome space near 10,000 square foot on top of the W Hotel in Hollywood. The right client needs substantial backing to win over the W.

“The majority of the population in Hollywood has been tourists, but I see that changing with massive mixed use buildings going up and more that will break ground in near years to come. This will lead to a more stable population that will be less fickle than tourists about restaurants and clubs being a hot spot to visit.”

Peter Silvester’s website has market insights for a variety of properties.

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