M id A tlantic Real Estate Journal — Shopping Centers — ICSC PA/NJ/DE Conference & Deal Making — August 26 - September 15, 2016 — 11C
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Sales at restaurants surpassed grocery sales in the U.S. for first time last year New trends in food-and-beverage concepts driving expansion at U.S. retail centers P is repaid, thus providing the property owner a return on its assumption of risk.
trucks don’t often pay tra- ditional rent, they attract shoppers to a center and have served as incubators to de- velop restaurant concepts that later become brick-and- mortar tenants. • Food halls: This urban retail format features a chang- ing mix of local and often in- dependent food-and-beverage outlets that collectively add to the center’s atmosphere and uniqueness. The more tradi- tional and popular food halls centered on historic land- marks like Reading Terminal Market in Philadelphia fea- ture a diverse array of fresh
and prepared food vendors. • Celebrity-chef restau- rants: While sometimes ex- pensive and risky to estab- lish in a center, restaurants helmed by well-known chefs can be significant, exclusive traffic generators for a prop- erty when they succeed. • “Grocerants” : Grocery stores that also offer pre- pared foods andmade-to-order meals provide a mix of fresh- ness, convenience and afford- ability that prove attractive to shoppers and, by extension, property owners. Though these formats are popular, cultivating them can
be risky for property owners. Restaurants— especially new, independent restaurants— have a notoriously high failure rate. What’s more, most prop- erty owners must contribute substantial capital to outfit their space for restaurant use. One solution CBRE has seen property owners under- take is to forego immediate repayment of buildout costs or to keep base rents low in exchange for an ownership stake in the restaurant. In that approach, the property owner receives a share of that restaurant’s profit even after its initial investment
HILADELPHIA, PA —With food-and-bever- age outlets now among the fastest-growing categories in retail centers, a new CBRE Group, Inc. , report identifies four emerging eatery formats poised for significant expan- sion: food trucks, food halls, celebrity-chef restaurants and “grocerants.” The CBRE report highlights numerous data points that un- derscore the booming growth of restaurants, including that total U.S. restaurant sales surpassed grocery sales for the first time last year, according to government data, and that they have fared better since the recession than any other retail category. It also points out that, while millennials dine out more often, older gen- erations spend more overall at restaurants. This implies more growth for restaurants as millennials age and earn more. Those factors and others collectively suggest that this growth in spending at restau- rants is more than a cyclical, post-recession recovery but instead a fundamental shift in American dining and spend- ing habits. “We know that the strength of the food-and-beverage cat- egory has led to many shop- ping center owners seeking restaurants as anchor tenants to draw in shoppers, whereas department stores and other retailers previously filled that role,” said David Orkin , executive vice president and restaurant practice leader, CBRE. “What’s particularly interesting today is that retail center owners are not only focused on traditional, proven restaurant concepts, but they are more willing than ever to embrace a broader range of emerging and, in some cases, untested concepts like food trucks which don’t pay tradi- tional rent. They are willing to take risks to compete.” CBRE enlisted its restau- rant experts, led by Orkin, to identify the up-and-coming restaurant formats likely to drive the category’s further expansion in retail property. These four categories offer many or all of the attributes that appeal to modern diners and shoppers: diversity, con- venience, uniqueness, relative affordability and experiential focus. • Food trucks : While food
“There’s a move toward financial partnership rath- er than traditional tenant- landlord relationships,” said Melina Cordero , CBRE’s head of retail research in the Americas. “That’s something that landlords are going to have to be open to if they are pursuing some of these cat- egories. In many cases, the customer draw generated by these food-and-beverage cat- egories and the atmosphere they foster make the invest- ment worthwhile.” n
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