Investors in real estate with a restaurant component are finding themselves in a glass half-full, glass half-empty kind of environment. On the one hand, strong demand for retail space from the food and beverage sector is pushing up rents. On the other hand, a shortage of retail space in desirable neighborhoods and rising rents are forcing some restaurants and bars to cut back on expansion plans or turn to new strategies to serve their customers.

These are among the findings of CBRE's recent Global Live-Work-Shop report. The year 2022 saw the national average asking rent rise 2.5% to an all-time high of $22.78 per square foot, while the nationwide retail availability rate fell to 4.9%, according to the report. "In some cases, owners are receiving upward of a dozen offers on a listing, leaving many would-be restaurateurs unable to enter desired markets and putting significant pressure on the brokerage community to deliver results in hyper-competitive landscapes," the report states.

These trends made 2022 one of the strongest years on record for the retail real estate market, CBRE found. At the same time, developers confront some challenges to future growth. Higher construction costs – predicted to rise 5.4% in 2023 – are affecting deal-making and rising interest rates are making financing more difficult. Competition for suitable sites is intensifying.