CREJ

May 2021 — Retail Properties Quarterly — Page 27 www.crej.com Apart from the convenience and efficiency for chefs, virtual kitchens can offer the following advantages: • A sense of community and cama- raderie to burgeoning chefs and res- taurateurs; • The ability to break into the res- taurant scene without paying the full cost of startup for a normal kitchen; and • More flexibility in terms of the type of space that can be used – they do not need a large parking lot nor storefront visibility. However, the ghost kitchen model also offers unique challenges, such as raising brand awareness and missing out on the walk-in foot traf- fic a regular restaurant concept can benefit from. Still, many retail properties already are seeing tenants leave or down- size. In the Denver metro area, over 830,000 sf of retail space was returned to the market in 2020 and vacancy increased by 1.1 percent- age points, according to published statistics from CoStar Analytics. Virtual concepts have the potential to snap up this vacated space and bolster retail demand. Small spaces, especially, are ideal for the virtual concept. A virtual concept can more easily and cheaply renovate space to fit their needs than a traditional con- cept that needs a larger kitchen and space for guests. For that reason, virtual concepts can focus more on a location with a strong consumer base than real estate with the exist- ing space and equipment needed. While the barriers of the pandemic are slowly beginning to fade out, the financial restrictions remain. More chefs and restauranteurs are attracted to the flexibility, low-cost and community-driven aspects of the virtual concept, which is sure to impact retail fundamentals. s Pearson Continued from Page 19 If the landlord has a partnership mentality and recognizes that smart reinvestment is in the best inter- ests of all parties, you will benefit by engaging early and showing a willingness to compromise and be flexible. Meanwhile, with respect to your underperforming real estate, be decisive. If the store needs to be closed, there’s no point in delay- ing the inevitable. Nobody likes to close a store. All too often, grocers avoid this difficult situation. “The cash flow is enough to cover a large portion of the rent,” the thinking goes. “Maybe the situation here will improve.” Hesitation is a mistake. To pursue early lease terminations and find suitable replacement ten- ants takes a significant amount of time. Once you’ve identified the drags on your real estate performance, cut them loose. n A good time to do deals. The pan- demic has shown in the clearest pos- sible terms that grocery-anchored real estate is among the safest har- bors out there. Billions of dollars of investment capital are pouring into the sector. Landlords are eager to add value to their grocery-anchored prop- erties and sell them for a tidy profit. But to do that, they increasingly want to add traffic-driving tenants to the property by introducing more out- parcels, drive-thru lanes and other amenities that proved enormously popular during the pandemic. Typically, they can’t do that with- out the expressed permission of the grocer, per the stipulations of protective clauses in the lease. That means that grocers in Colorado now are enjoying an even stronger degree of leverage than in the recent past. They can selectively cede some of those rights in exchange for better lease terms or more reinvestment by the landlord. Just be sure not to sac- rifice too much of your own visibil- ity, parking capacity and customer access in the process. Margins always have been thin in the grocery sector. Over the past year or so, many grocers were able to operate with a bigger cushion due to the shift in spending away from restaurants, travel and live events and toward groceries and essential services. Moving forward, the sec- tor will get even more competitive as consumer spending diversifies and new competitors continue to expand. For forward-thinking gro- cers that makes portfolio optimiza- tion and planning a strategic imper- ative. s jmckeska@agrep.com McKeska Continued from Page 20 shopping and eating. These changes have clear implications for the use of space – what it does, where it is and how it’s laid out. Landlords and tenants should take time to reground themselves in their business model and understand where it’s headed. How can existing space be made more flexible? Is there an opportunity to work with other brands, consumer packaged goods or restaurants? How can spaces be created that consumers want to visit? Food and grocery vendors that keep these considerations in mind will be positioned for success in the new nor- mal. And while new innovations are continually emerging, we can be sure to see the ones mentioned above per- sisting in 2021 and beyond. s stefan.read@jackmanreinvents.com Read Continued from Page 21