HOUSTON – (By Dale King, Realty News Report) – Structural shifts in the food-and-beverage industry — including the rapid rise of third-party meal-delivery services, increased adoption of in-store automation and continued growth of fast-casual concepts — are transforming both the U.S. restaurant landscape and the real estate those businesses occupy.
A new report from CBRE outlines eight major trends, including the spread of small-format “eatertainment” designs, and evaluates how these shifts are reshaping the food-and-beverage sector and its real estate needs.
“While restaurants are less vulnerable than other retail categories to e-commerce encroachment, they’re still undergoing dramatic change driven by technological advances and evolving customer preferences,” said Meghann Martindale, CBRE’s global head of retail research.
“Retail-center owners must carefully consider which restaurant concepts best suit their properties and customer base, and they need to strike the right balance of food and beverage options so one category doesn’t overwhelm the center’s mix.”
Restaurants now represent 17% of U.S. retail sales — more than any other retail sector — and dining-out growth has outpaced overall retail sales gains in recent years. This expansion is prompting new approaches to how restaurants deliver food, manage labor and capitalize on the fast-casual trend.
Below are several of the trends highlighted in the report and their implications for retail real estate.
Delivery
Last year, delivery revenue for U.S. restaurants jumped to $34 billion, up 13% from 2017, the report says. Third-party delivery providers are capturing an increasing share of that market — projected to reach about 70% by 2022, up from 58% the prior year.
Because third-party fees can be high enough to erode margins, restaurants are experimenting with methods to reduce those costs. Strategies include encouraging customers to use restaurants’ own delivery apps and platforms and negotiating data-sharing arrangements with third-party providers to secure more favorable delivery pricing.
Design changes are also emerging: many restaurants now provide dedicated pickup areas, and sometimes separate entrances, to speed delivery orders without disrupting dine-in customers.
Robotics may play a larger role going forward.
“I expect major office campuses will soon copy the University of Houston’s delivery-robot model,” said Lacee Jacobs, who leases retail and restaurant space for CBRE in the Houston area. “Employers are always seeking employee amenities, so a delivery service that doesn’t require additional staff makes a lot of sense.”
Landlords and developers are also planning for delivery partnerships, considering how delivery vehicles can park, pick up and leave without disrupting the on-site customer experience, Jacobs added.
Technology in the kitchen and front of house
The 36-page CBRE report finds that more restaurants are adopting technology to streamline front-of-house services and improve back-of-house operations like inventory management.
National chains increasingly install kiosks, tablets and tableside ordering systems to automate ordering. This technology can reduce labor costs and shrink space needed for customer queues, the report notes.
Operators see technology as a competitive advantage: more than eight in ten restaurant operators surveyed said tech gives them an edge, and many planned to increase tech investment in the near term.
Self-service kiosks are particularly popular; their growing adoption is expected to drive market value above $30 billion by 2024. Chains such as Panera and McDonald’s have used kiosk ordering for years. KFC planned kiosks in 5,000 restaurants by 2020, and Taco Bell aimed to equip all U.S. locations with kiosks by the end of 2019.
Automation helps restaurants respond to rising labor costs and hiring challenges while allowing them to serve more customers efficiently. The tech upgrade extends beyond the front of house: more than a third of fine-dining operators and at least half of operators in other categories said they would invest in back-office technologies to improve the employee experience, attract and retain workers and better manage food inventory and costs.
Fast-casual dining
The fast-casual format — offering higher-quality food than fast food, quicker service than full-service restaurants and more affordable prices than full-service dining — has led recent expansion. Nearly four in five restaurants opened last year by top-500 chains were fast-casual concepts. For retail-center owners, the challenge will be selecting the right fast-casual tenants and avoiding an overconcentration of similar operators.
Eatertainment and smaller formats
“Eatertainment” concepts that combine food and beverage with live or virtual entertainment have become anchors at many suburban malls and standalone locations. Now operators are testing smaller footprints to access dense urban markets and capture steady foot traffic from nearby residents and office workers. Topgolf, Dave & Buster’s and Punch Bowl Social are among those exploring reduced-size prototypes.
Topgolf’s standard large-format venues are about 55,000 square feet and include driving ranges. The company introduced the Topgolf Lounge — a roughly 7,800-square-foot, tech-driven concept featuring virtual games, music and a curated food and drink menu — to reach urban customers.
Dave & Buster’s has tested smaller formats, such as a 17,000-square-foot store in smaller Texas and Arkansas markets. Punch Bowl Social opened a 22,000-square-foot venue in downtown Austin’s Scarbrough Building.
“Restaurants are adapting to evolving eating behaviors, and so are grocers, movie theaters and breweries,” said Jazz Hamilton, first vice president at CBRE in Houston. Grocers are investing heavily in delivery and prepared-food offerings as quick, healthy options. Movie theaters now provide expanded food menus beyond popcorn and soda, and breweries increasingly offer substantial small plates that compete with traditional entrees.
“With Houston’s growing population and recognition as one of the top U.S. cities to start a restaurant, demand for dining venues will remain strong and the city will continue to attract food-focused customers.”
The CBRE report concludes that despite economic headwinds, people will continue to dine out, and many will shift toward more affordable options — moving from fine dining to full service, fast casual and fast food. Fast casual is likely to be the primary beneficiary of that shift.
Dec. 2, 2019 Realty News Report Copyright 2019
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