Drive-Through Retail Booms in SoCal During the Pandemic

Drive-through retail became an investor favorite during the pandemic. In 2020, drive-through revenue increased 5% while revenue from full-service restaurants declined 15%, according to research from CBRE that was obtained exclusively by GlobeSt.com. As a result, both investment volumes and leasing activity for drive-through product increased last year.

“With indoor dining being closed or heavily restricted, drive-throughs provided a quick and easy food option in addition to delivery and outdoor dining. As customers wanted to limit contact, drive-throughs provided another option of being able to get food without having to leave your car and staying safe,” Patrick Wade, SVP at CBRE, tells GlobeSt.com.

Drive-through retail includes everything from fast food restaurants to coffee shops and even pharmacies. In Southern California, leasing for these properties totaled 147,000 square feet. Freestanding drive-throughs also took a bigger share of investment volume, up from 5.9% in 2019 to 7.1% in 2020. “Both lenders and investors have shown great interest in drive-throughs as they feel confident that they will be able to remain open, even as the pandemic forces some restaurants to close or eliminate indoor dining,” adds Wade. “Drive-through businesses also offer lower operating costs versus indoor and full-service F&B. Investors have taken note of that and the fact that store sales for drive-throughs have increased.”

Drive-throughs are one of a handful of retail segments that have outperformed the market during the pandemic. “Essential businesses such as grocery stores, have performed very well in the pandemic,” says Wade. “Businesses that were able to pivot quickly to online and omni-channel models were able to pick up market share. Likewise, food and beverage outfits that are offering drive-through optionality, or similar ideas, such as curbside pick-up and in-home delivery, have also done quite well.”

Even better, Wade expects this top be a permanent shift. “Drive-throughs are here to stay and will continue to be in high demand due to their resiliency and lower operating costs versus indoor and full-service dining,” he says. “Many restaurants that used to only offer dine-in options are now rolling out drive-throughs, such as Chipotle and Habit Burger, to name a couple.”

It also shows that investors are continuing to find and chase opportunities to place capital, despite the market dislocation. “We are seeing boosts in store sales for grocery and quick-service restaurants,” adds Wade. “Having good real estate in dense infill locations – in spite of the challenges brought on by the pandemic – is ultimately advantageous because a strategic central location helps with delivery and quick access to a broader customer base.”