Full-Service Restaurants Rise to the Top

Full service restaurants are rising to the top of the retail leasing food chain. In the past few years, restaurant and food options have been a go-to for retail landlords, who see food service as being Internet resistant, but that trend is changing. According to new research from CBRE, full-service restaurants signed most of the 400 food-service lease deals completed last year in Southern California. Fast food restaurants came in number two followed by fast casual or quick service restaurants.

“The restaurant retail landscape is changing as sit-down establishments are creating experiences and environments that allow the customer to enter into that specific culinary world and escape from the outside setting,” Brandon Cohan, senior associate at CBRE, tells GlobeSt.com. “Similarly, newer quick-service restaurants have found their foothold by offering the consumer more than just a sandwich, but a specialty product in that category and a story to take home with them. Restaurateurs and well-known chefs recognize that consumers want more than just a regular meal, but an engaging and memorable experience. That is a concept that has cut across pretty much all aspects of retail and food retailers, specifically, are chasing that sixth sense to stay ahead of the curve.”

Los Angeles is one of the leaders in restaurant leasing trends, and many restaurant concepts begin in Los Angeles before expanding nationally. As a result, Los Angeles leads in restaurant leasing volume. “What we’re seeing here in LA and Southern California is eventually reflected across the nation,” says Cohan. “Increasingly, food and beverage is catering to the population of 25 to 35-years old. It used to be that a new chef of an upscale cuisine was the talk of the town, but now it is the new, 500-square-foot coffee shop in a cool space and original interior design with a line out the door, drawing customers who are willing to pay $5 or more for a handcrafted latte. Customers want an experience. You can buy an iced latte from anywhere, but how about the ambience of the store, the branding, how does it make you feel while you’re there? That story, that experience is now often times the make or break for retailers.”

In general, food service retailers—not only full-service experiences—are having a major impact on retail leasing volumes. Food retailers are helping to revive neighborhoods and backfill vacant retail spaces. “Space that once was occupied by dying brand is now being filled with a modern restaurant or a retailer with an appealing atmosphere,” Cohan explains. “Neighboring store fronts reap the benefits of the high demand from curious visitors. That is particularly apparent in still-evolving neighborhoods, such as parts of Downtown. In summary, full-service restaurants are here to stay, and I think we will continue to see up-and-coming eateries, hip coffee shops and other new food concepts take root across Los Angeles and Southern California’s submarkets.”

There are examples throughout Los Angeles, in particular. Cohan says that unique concepts are now coming to Brentwood and Beverly Hills, markets that previously have been home to national chains. Little Santa Monica is another example of a street that has been transformed with coffee shops and both quick service and full service restaurant concepts. The biggest benefit is the stability of these areas. “Brentwood, which has not seen turnover for the last five years, now offers popular, full-service as well as fast-casual restaurants on San Vicente Blvd., such as Kreation Juicery, Alfred Coffee, Alfred Tea Room, Sugar Fish, Joe & the Juice, Sweet Green, Mendocino Farms, and now the second Jon & Vinny’s location,” says Cohan.

Even with the cultural shift toward eating out, can we have too many restaurants? Cohan says this may be one reason why there has been a decline in quick service leases as landlords are looking to strike a balance. “I see many landlords being increasingly dedicated to making entire streets better,” he explains. “That means they have also become better at curbing their appetite for quick deals that might not make sense for a neighborhood. I think they have seen the fall last time the economy collapsed and their storefronts were vacant for years. Landlords are more educated and more involved now. Today, it’s not just about the highest but also about the best fit for a particular store front as well as the surrounding area. It is a much better long-term strategy.”