Four Ways the Restaurant Industry Is Changing

Millennial spending on restaurants is driving rapid change in the food-and-beverage industry. A new survey from CBRE reports four emerging trends that will significantly impact the real estate for foo-and-beverage operators, both in retail and industrial. The survey predicts that neighborhoods on the edge of the urban core will become food and beverage hotspots; the growth of single-person households will drive more spending on restaurants; spending on restaurants and groceries will outpace soft goods in the next five years; and, finally, millennial spending on food and beverage will exceed all other generations in the next 10 years.

“This is primarily due to demographic shifts that have led to new lifestyle habits. People in the United States are going out to eat with greater frequency because it has become part of a new lifestyle,” James Crocenzi, SVP at CBRE, tells GlobeSt.com. “People like to go out and eat and enjoy themselves, so it isn’t only about eating but about the social aspect of dining. Millennials are driving much of that growth. They have been spending the largest percentage of their discretionary income on dining.”

In addition to demographic shifts, social media use is also fueling increased popularity in restaurants and dining out. “We have seen a movement of food as being Instagrammed or photographed on social media,” adds Crocenzi. “That has been driving sales.”

These emerging trends will impact retail real estate the most significantly. Owners will need to adapt to the changing demands of consumers and dedicate more space to food-and-beverage uses. Crocenzi says that the change has already begun. “This has already impacted the retail industry,” he says. “You are seeing an increasing percent of shopping center non-department store floor area dedicated to restaurants. When I started in the shopping center industry 30 years ago, a regional mall would have 10% to 15% of their non-department store floor area dedicated to restaurants. Now it isn’t uncommon to see that allocation be 20% or 40% and sometimes as high as 50% of the floor area.”

Developers are also responding to these changes. New retail concepts are coming with built-in dining areas and dedicated parking for delivery services. “With these changes also comes all of the accommodations that developers have to make to handle additional restaurants, parking and utilities,” explains Crocenzi.

On the industrial front, demand for restaurant delivery is spurring new industrial demand. Home delivery operators are quickly leasing infill industrial space to support restaurants in managing online orders. “There are a number of food delivery start-ups that have been taking industrial space,” says Crocenzi. “The most aggressive is a company called Kitchen United, which has been opening up locations across the country. Restaurants are starting to shift their delivery service from the restaurant to off-site facilities. To handle this additional volume, more companies are going to get into the kitchen start-up business.”

While some of the survey predictions are years away, Crocenzi is prepping his landlord clients today for these changes. “My landlord clients want to make sure they are aware of these changes and they are making sure that they are dedicating parking stalls to take-out and delivery service,” he says. “In Southern California, some of the most popular and productive restaurants are located in shopping centers, and the location in the center is very important.”