CNBC confirms what we've already seen in the marketplace - food is ruling retail real estate.
“For the first time nearly two decades, restaurant sales surpassed supermarket sales last year. The turnaround is now showing up in retail real estate, as landlords seek to not only profit from the new normal, but reinvent the now-suffering retail mall. E-commerce may be driving consumers away from shopping centers, but food is pulling them back in.”
With many segments of retail struggling, landlords are looking to cash in on the restaurant boom. Some landlords are even financing small restaurant start-ups, realizing that a successful restaurant can increase traffic and sales for other retail tenants and make the entire center more profitable in the long run.
Even previously empty parking areas are being put to use as restaurant space. Landlords are encouraging food trucks to gather in their lots–creating mobile outdoor food courts.
Here in Metro Detroit, restaurants are playing a starring role in the revitalization of downtown areas – both in Detroit and in the suburbs. But, according to Detroit Eater, a survey finds that Detroit restaurants compared with other top U.S. cities came in last for average revenue.
“While average transactions were fairly low compared to other cities included in the survey, Detroit showed a 9 percent growth in year-over-year transactions suggesting that more people are dining out.”
Those statistics are likely to improve as the excitement about Detroit’s restaurant scene continues to grow. As Peter Elliot writes in Bloomberg, “Detroit is on its way back from the brink and its revival is being led, in part, by the food and wine industry. Don't let the reputation scare you: It's one of the most vibrant, interesting and delicious places I've visited in years.” He attributes this restaurant renaissance in part to the great deals and wide variety of interesting locations available for restaurants space in the city.
Millennials are a key component in the rise of the restaurant industry. This year the Pew Research Center announced that Millennials have overtaken the Baby Boomers as history’s largest living generation, and BCG, Boston Consulting Group, reports that Millennials eat out 3.4 times a week, compared with 2.8 times a week for non-millennials. No wonder landlords are eager to cater to consumer appetites right now.
Paul Bensman, CEO of Locations Commercial Real Estate Services, put it this way:
"Restaurants are popular with landlords because, let’s face it, we’re not going to stop eating. Fast fresh casual restaurants have become a mainstay in our busy lives. They appeal to every age group and every taste. Factoring in the time for shopping and preparation, plus the cost of food spoilage, this segment of the restaurant industry has become a cost-effective alternative to preparing a meal at home. Retail centers benefit from the extra traffic these restaurants bring in. A successful restaurant can make spaces in the rest of the center more appealing for prospective tenants - and increase rental rates for the entire center.
Restaurants bring people to downtown areas as well. Whether it’s a fast lunch or a special dinner, restaurants create destinations that benefit the surrounding businesses. They fill vacant retail spaces, increasing rental rates and property values in general."
