My organization is about to have a retail vacancy at an absolutely SICK location in Northern Virginia and we're kicking around the idea of recruiting a nightclub to the location. This is kind of an open-ended discussion, but what are the thoughts? Anyone familiar with the business? Any obvious pitfalls or things that one should keep in mind? Should we invest equity in the nightclub?
Would love nothing more than to have a NYC/LA nightclub owner/investors/Persians to open up shop in our location.
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Glad to see you've already identified your niche market, Persians.
LOL. I was hoping someone would appreciate that. :)
It's difficult to replicate a successful big city nightclub experience outside of a few cities like NYC, LA, Vegas and maybe Chicago and Atlanta. You need population density and enough of a young population that goes out multiple nights per week, while also having enough disposable income for bottle service, which drives revenues at big clubs.
The financials from Marquee were sent around as a MBA case study (wharton maybe?) a few years ago. Those would be worth getting a hold of, but you need to realize that it won't be possible to do in most markets.
Ha, yes. Not sure how I forgot to include Miami.
Not to mention that you will need a crowd that appreciates the whole 'models and bottles' scene.
Just took a quick skim over that Marquee case study, great call Tech Banking. I'm bookmarking it to go back and spend some more time with it.
The market, to me, would be the biggest driver of all. If you are somewhere around Arlington I could probably see it working as opposed to further out by Tyson's Corner; but I will defer 100% to you on the market being ready for a nightclub. And don't get me wrong, I love Tyson's Corner. Maybe I have no idea what Northern Virginia means.. haha.
If you have the right operator, I think that you'd be able to make it work if the location is really that fantastic. Nightclubs strike me as having the potential to go downhill really quickly, especially if the crowd isn't right and the concept falls off. Outside of the pretty obvious issues that come with screaming, drunk people listening to amazingly loud music I'm not sure anything else sticks out to me besides the risk of having them really quickly crash and burn. Are you thinking of more of an upscale lounge type setup, or something big/brash and vegas-like. Those are two entirely different animals.
Yeah, it's Arlington adjacent to the metro. The location is about as ridiculous as it gets outside of D.C. Median age of 30 within a 1 mile radius, $110,000 median income (1.8 persons per household), 2/3 renters, 75% with at least a college degree.
A nightclub is the most textbook way to launder money
Lenders hate to see night clubs on a rent roll, unless the location is truly so great you can imagine replacing the operator instantly if the business folds for whatever reason. Stands to reason that if there isn't a club there already, and you as landlord would be recruiting one, then it probably isn't that kind of location.
That said, if you're doing it for cash flow, why not? I just wouldn't expect it to help you juice underwriting for a sale or refinance. That's one of the pitfalls, from my limited perspective.
Thanks for the insight. We have no debt on the building and no plans of selling it ever. Have owned the building for 30 years and will probably own it for another 30, at least.
We're just kicking around the idea. Our neighborhood has gotten so popular that it's overflowing with restaurants, many which keep failing under the weight of competition. We're trying to figure out how to bring in an operator that won't fail that isn't a bank branch.
granted, I haven't lived in DC for a while, but I got the sense that it's more about bars than clubs. maybe you're using the 2 interchangeably, but I'd do some boots on the ground research (aka go party in DC a couple big weekends) to make sure there's a market for it.
How would the neighborhood react to the onslaught of fake tans, Ed Hardy shirts, underground drug deals, and noise? A lot of places wouldn't exactly appreciate it.
Where in NOVA is the location exactly, I doubt you could do a club in Arlington or Tysons, DC might be a different story however.
There's a nightclub in Arlington already that I think does pretty well. However, I believe the nightclub owner also owns the building, so the nightclub isn't paying oppressive rent.
let me know when opening night is, vip?
I have two friends who invested in nightclub in DC called the Huxley. While I can't say how the investment is doing, the two friends have invested in another planned nightclub with the same team, so I assume it went fairly well. Maybe reach out to that team for advice, they have experience managing one of the large Vegas clubs.
As a DC resident I'm skeptical of a NOVA location for a nightclub because it's NIMBY central. People won't go far for a typical nightclub but you do see "warehouse clubs" ie EchoStage far from the city center drawing large crowds from all over.
FYI, you cannot have bottle service in the state of Virginia, which is why there are many bars in Northern VA but not very many "clubs", most are in DC proper.
First hand knowledge here from a prior industry. We opened a nightclub on our property that set us back about ~$25m after all was said and done. The city already had a few decent nightclubs, but nothing to this scale whatsoever. Based on the cost though, the market just did not have the demographic to make the venture profitable. When you take into account the average lifespan of a quality nightclub, it would be very difficult to make any money in the long run if you're outside of a prime market with the "models and bottles" culture where both locals and tourists can fill your place nearly 7 days a week.
The Northern Virginia environment may have changed from when I was there, but I do not believe it would be a good call to pursue such a venture there. A bar with room to dance may be more cost effective in your case and come with a much more attractive payback period.
Outside of a major market, you can fully expect to lose money or struggle to breakeven Sunday-Wednesday, breakeven on Thursday if you run girls night or happy hour specials, and profit on Fridays and Saturdays.
In an area like Northern VA, if your drink prices are like most nightclubs, you may end up with a crowd that gets wasted at another bar in town, pays cover at your place to dance a bit, then leaves to get drunk again.
I live in Arlington. People often go to Spider Kellys, Whitlows, and Clarendon Ballroom(the only "club"). Do it, I know my crew would roll through that on the regular but keep that music fire cuz.
I also live in Arlington, I personally don't think a club would do well there. I dont think its the right scene. If my friends and I want to go to a club we go into DC. I think a bar would be a better bet
Surprisingly great discussion.
Literally Just found out that my friend's wife's family owns every major nightclub in the STATE of California. It sounds like it would make sense to let a major owner/operator perform its due diligence and decide if it makes sense at the location. If so, then get a lease guaranty from the owners. Doesn't really sound like a venture we'd want to enter into with an inexperienced owner/operator given the less-than-normal location and the restrictions within Virginia.
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