Appetizer or Entrée?

Food Continues to Fuel Retail.

Once banished to the central food court, dining has become much more than a retail afterthought. Nearly a quarter of all trips to shopping centers today are primarily focused on eating.1

People are dining out more often at all price points, new restaurant and food concepts are exploding and opportunities are being created for retail centers of all types—from “urban villages” to small strip centers to neighborhood centers. Many of the questions we hear from clients relate to the role of food in the retail center and how to create the right mix of tenants.

In a near-peak real estate cycle, staying ahead of these shifts is more important than ever, so keep an eye on our top five
focus areas.

Food-Powered Retail in 2017

  1. Understand the rising role of food in retail
  2. Recognize food evolutions (and revolutions)
  3. Design for cross shopping: parking and place
  4. Use technology to your advantage
  5. Specialize, specialize, specialize

Understand the Rising Role of Food in Retail

Even in today’s world of online convenience, where you can use an app to get groceries delivered to your doorstep in an hour, people still want to dine out. As a culture, America has become a nation of foodies and dining out is more social in every sense of the word. Snapchatting a meal or Yelping a restaurant review is de rigueur for the dining experience. People are increasingly gathering in mixed-use districts for a bite, to pick up dinner, or to purchase a specialty wine or infused olive oil. Retail centers are capitalizing on these trends to create vibrant and lively areas anchored by a growing collection of food offerings.

And there’s no end in sight. The National Restaurant Association predicts industry sales are expected to reach $799 billion in 2017.

Recognize Food Evolutions (and Revolutions)

Food trends move quickly. Yesterday’s flatbreads and exotic mushrooms have given way to ethnic condiments and house-made soft drinks with rosemary and mango.2 While some trends are a flash-in-the-pan, we are seeing a persistent shift toward “fast casual” dining and more health-conscious menu options.

We have also seen a proliferation of chef-driven restaurants in the fast casual space, as television food channels and news media continue to turn chefs into celebrities. The demand is significant—65 percent of consumers recently said they would be more likely to go a fast casual establishment that was gourmet or chef-driven.3 From Mario Batali to Danny Meyer, it’s clear that a notable chef can drive sales and spice up the reputation of a restaurant.

Design for Cross Shopping: Parking and Place

In downtown areas or urban villages, it’s becoming more likely that a visitor’s trip revolves around having a meal. Whether dinner leads to additional retail spending depends largely on how easy it is to “cross shop.” On the way to a restaurant, what do visitors walk by after parking the car? Are shops still open after dinner? How attractive and enticing are the window displays?

We continue to see thoughtful design supporting cross-shopping in mixed-use developments with restaurants joined by office space, luxury multifamily housing, shops, cinemas and entertainment venues. These newly minted urban enclaves function as suburban downtowns and are magnets for millennial workers and employers. And yet, the older, 10,000-12,000 square-foot mini-anchor spots can still be challenging to fill.

Here again is an area where food is driving change: these large spaces can often be broken up and occupied by multiple restaurants or food purveyors. Restaurants can make larger spaces work by providing desirable experiences: add ping pong or pool tables, TVs or other active space if the rents and zoning accommodate such uses.

Use Technology to Your Advantage

New tools can make urban design more efficient and profitable for retailers. Beacon cameras, sensors and affinity tags can provide detailed information on how users engage with a space or district. Where do they park? Walk? Eat? How long do they stay inside a shop or restaurant?

Data on dwell times, store footfall and pedestrian traffic can be used to drive rents as well as reposition existing tenants. Technology also makes consumers more willing to travel to buzzed-about restaurants. Smart phone apps that provide reviews, maps and social sharing make off-the-beaten-path locations more discoverable and easier to find.

Specialize, Specialize, Specialize

It’s no secret that the traditional grocery store is getting squeezed on all sides—by big-box discounters, by high-end grocers and by online shopping vendors who deliver straight to your doorstep. Previously, a large supermarket could carry 5-10 smaller in-line retailers in a neighborhood center. Today it’s more likely a center contains a large, updated grocery store, several restaurants and multiple “grab-and-go” outlets. Retailers such as brew pubs, purveyors of locally roasted coffees, and exotic tea shops are popping up and testing the depth of niche markets.

Fuel Up for 2017

This increased focus on profitability and staying one step ahead serves as a good reminder that the retail industry faces constant change: shopper fashions, dynamic consumer demographics, technology improvements, cyclical economic conditions, new ways of shopping…the list goes on. Retailers have little choice but to change with the times or risk being eaten alive by the new market realities.

We’re seeing many exciting prospects on the menu for retailers and consumers alike. Not every player will make it—that’s the dynamic nature of retailing. But for those bold enough to look ahead and spot new opportunities, the future will be more successful than a food truck peddling artisan pickles and hyper-local ancient grains.

1 Conlumino, data from Intelligence Center platform
2 “10 Years of What’s Hot,” National Restaurant Association
3 “2015 Fast-Casual Chains Survey,” Zagat

ANJEE SOLANKI, National Director, Retail Services, USA

Anjee is based in San Francisco and provides strategic leadership to over 485 specialized retail professionals across 89 markets. Connect with her on twitter @AnjeeSolankiCRE.