For the first time nearly two decades, restaurant sales surpassed supermarket sales last year. The turnaround is now showing up in retail real estate, as landlords seek to not only profit from the new normal, but reinvent the now-suffering retail mall. E-commerce may be driving consumers away from shopping centers, but food is pulling them back in.
“It changes the landscape of retail real estate fundamentally, because what we have is a really fundamental shift in the different categories that are performing well and those that are struggling,” said Melina Cordero, CBRE’s head of retail research in the Americas. “With restaurants that are coming in with strong, high growth, they’re sort of the saving grace for landlords of these retail spaces to come in and drive traffic and sales.”
Landlords are doing this in four distinct categories, cited in a new CBRE report: Food trucks, ‘grocerants,’ food halls and celebrity chef restaurants. While food trucks are mobile and don’t necessarily pay rent, they are an estimated $2.7 billion business, and landlords are starting to make deals with vendors, even creating food courts at the mall out of the trucks.
“Food trucks are basically the pop-ups of the restaurant business. They come in, they can set up, low cost, and they’re constantly changing,” said Cordero, who emphasizes the high demand from consumers for diverse food options.
At a lineup of food trucks outside the Mazza Gallerie mall in Washington, D.C., Henry Farkas was skeptical of the theory that the trucks drive shopping.
“People are here during lunch, and there’s not really a chance to do both if you’re going to eat,” said Farkas, but two trucks over, Sarah Wise saw the strategy.
“I can speak for some of my co-workers and myself, we’ve been known to make mall trips. If I’m thinking that I need something, I come out here and see it, it’s going to kick me in that direction,” she said.
That potential is also changing the way landlords see smaller food start-ups and their potential to drive foot traffic to apparel stores.
“They probably don’t have the credit of some of the traditional restaurants, and so these are changing the way people underwrite and configure retail real estate, it’s also changing the investment market for it,” said Spencer Levy, CBRE’s head of research for the Americas.