CREJ

Page 2 — Retail Properties Quarterly — November 2019 www.crej.com Contents Letter from the Editor W hile editing the issue, I learned a new phrase: ghost kitchens.These kitchens, which are gaining popular- ity in direct response to the increase in delivery demands, focus solely on remote dining. Ghost kitchens are secondary loca- tions with the purpose of making food for delivery only.These kitchens help “restaurants increase production and better scale delivery services, all without burdening in-dining kitch- ens to meet sup- ply,” according to a report by CBRE and Streetsense, “Retail InnovationWatch: Restaurant Delivery + Delivery Automa- tion.” Just a few years ago, restaurants were a retail tenant darling because they seemed to offer a product that was “internet resistant.” However, technology’s reputation as the great disrupter disagreed. Now thanks to a variety of apps, such as Uber Eats and DoorDash, getting a meal from a favorite restaurant delivered to your home is gaining popularity. As explained in the report, delivery service is required for restaurants to remain competitive and capture increasing demand for remote dining. This can be done by offering delivery service in-house or by partnering with a third-party provider. So, what does this increase in deliv- ery options have to do with real estate? “This incredible shift in preference from in-store dining to at-home deliv- ery opens up enormous opportunity for restaurants everywhere,” said Jay Cold- ren, managing director, Eat + Drink, Streetsense, in the report. “Like guests at a masquerade ball, these restaurants can become whoever and whatever they want in the digital world, regard- less of their location, financing or phys- ical footprint.” The most obvious change to a restau- rant’s layout is lines or areas dedicated to delivery drivers, Justin Krieger writes on Page 15. However, as he writes, ghost kitchen offer possibly a more interesting change. The report shares two examples – Cloud Kitchens and Kitchen United. The first is a startup owned by City Storage Systems that aims to repur- pose a nationwide inventory of nonper- forming real estate into these kitchens. The goal is to partner with chefs inter- ested in creating their own online-only food delivery businesses.The company also offers software to help run them. The latter is a shared kitchen service to help streamline labor with centralized food runners and expediters. Both companies are based in Cali- fornia, so it will be interesting to see if either enter our market – or if other local concepts are not far behind. According to Cloud Kitchens’ website, the food delivery market is worth over $35 billion per year in the U.S., so it’s hard to imagine the trend won’t be coming to kitchens near us soon. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext. 104 Delivery makes its mark Challenges and opportunities for retail development Jason Schmidt, Tyler Carlson and Daniel Ryley Compared to coasts, Colorado offers upside Heather Taylor, Bart Connolly and Danchen Astle Driving forces behind private capital investment Parker Brown Tangible value attracting safety-seeking investors Mitch Veremeychik Is it time to consider repositioning your holdings? Troy Meyer and Kevin Matthews A litmus test to identify the elusive retail experience Danaria Farris McCoy Evaluating retail deals in an Amazon world Justin Krieger Considerations for procuring the right food hall Tyler Bray and Tanner Johnson 4 6 8 10 12 14 15 16