As published on Connect.Media on May 1, 2018
The growth of the fast-casual restaurant sector and rapidly evolving food trends have benefited the retail industry, while presenting new leasing challenges. Connect Media asked Coreland’s Ben Terry, Vice President of the firm’s retail brokerage division, to share insights into the trends driving this retail sector.
Q: Food and dining concepts have emerged as a driver within the retail sector. How is this changing the dynamic for landlords?
A: Competition in the restaurant industry is at an all-time high. There is great demand for quality, convenience and personalization. Like traditional retail, consumers are drawn to specialty and moving away from generalists ̶ no longer interested in one-stop shops like Sears, and choosing specialty cafés over the old general American fare such as Claim Jumper or Applebee’s.
With new food concepts popping up daily, there is much more demand for space in the market than supply. Landlords are in a position to be selective in terms of tenant variety.
Q: What does the term ‘Embrace Different’ mean in today’s food-driven retail environment?
A: Consumers today are so much more adventurous, craving international flavors and specialties that were overlooked in the past. Look no further than the Poké craze or the group of Ramen concepts positioning themselves to enter the market. Even in the coffee and tea category, unique concepts are seeing tremendous success over branded counterparts. Reborn Coffee, with two Southern California locations, recently won America’s Cold Brew Competition.
Welcoming new concepts can completely reinvigorate a shopping center and strengthen leasing efforts. However, a risk of integrating trendier concepts is that on occasion a concept might not succeed. While these operators may not have substantial collateral, landlords should focus on the fundamentals. Evaluate the operator, menu and concept, and ensure there is enough working capital to successfully open and run the business.
Q: What are some of the ways landlords can mitigate the risks associated with new concepts?
A: Having the right infrastructure in place, such as a hood system, grease interceptor and walk-in freezer, will make it less painful to replace concepts down the line. The reality is that many new concepts can operate with a generic kitchen build-out, making them much more flexible than national brands and reducing costs.
Protect exclusives in lease negotiations. Don’t giveaway general exclusives such as “no pizza” or “no soy sauce-based food” that would take away new concept opportunities. Be primary food specific and specify style of restaurant. Be sure to carve out of the exclusive similar concepts that don’t directly compete.
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