Friday, May 17th, 2019 May17th2019

Sell for More News: The food and beverage business is changing before our eyes

Published on May 17th, 2019

Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.

 

A significant shift is underway for the US restaurant and grocery industries…and by extension the real estate these operators occupy.

These changes include:

  • A greater push for convenient, prepared foods
  • The emergence of inner-ring suburbs as the industry’s hottest market
  • A growing millennial influence

Increasingly stores will find it is essential that they accommodate delivery, pickup, prepackaged meals, automated ordering and self service.

The food-and-beverage category claims nearly 25% of all retail sales in the US.  And few other sectors have expanded their presence in shopping centers as quickly as restaurants and grocery stores have recently.

But this sector is susceptible to sweeping demographic changes too. We’ll see these changes influence commercial real estate through grocery-restaurant combinations, more kitchen-only outlets and delivery services.

Next, much densification is occurring in inner-ring suburbs. In turn, restaurants, bars and grocery stores are ideal anchors for mixed-use complexes developed in these neighborhoods, serving as gathering points for residents and employees alike.

Additionally, the growth of single-person households will boost demand for convenient dining. The percentage of single-person U.S. households rose to 28% last year from 17% in 1969…with growth across most age groups. That, coupled with a rise in dual-income households, means people have less time to prepare, cook and clean up meals.

Among the real estate implications of this shift are added momentum for convenient formats like fast-casual and fast-food restaurants, and inclusion of bars and restaurants in grocery stores to offer made-to-order, higher-margin fare.  Some restaurants are adding kitchen-only locations catering solely to delivery and carryout customers.

Meanwhile, the category sees lower e-commerce penetration than most others.

Those factors have resulted in restaurants, bars and grocery stores claiming an expanding share of retail real estate. For example, US mall square footage dedicated to restaurants (excluding food courts) increased 18% since 2007.

It’s expected that millennials’ spending on food and beverage will exceed all other generations within 10 years. Millennials dine out more than other generations, but they’re thrifty diners.

However, millennials’ wealth constraints will ease over the next decade as they pare their debt and their income grows, resulting in millennials spending more on food and beverage.  Boomers, meanwhile, are likely to spend less as they progress in retirement. These shifts underscore the need for retailers and retail-center owners to analyze and understand their customer base, often through location-analytics technology, so they can tailor their menus and store locations accordingly.

I’ve always been a guy that’s pretty comfortable with change so these shifts excite me…both as a consumer and as a participant in the commercial real estate business.

 


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 414.324.4938, 615.603.9770, click to schedule a call or Beau@ProwessIRES.com