CREJ - Retail Properties Quarterly - November 2016
Food and beverage outlets are among the fastest-growing categories in retail centers, according to a CBRE Group national report. Several other pieces of this report about restaurant retail caught my attention as well. Restaurants have fared better than any other retail type since the recession, according to the report. And, given that last year the government reported that restaurant sales surpassed grocery sales for the first time in the U.S., it makes sense that this industry is thriving. Millennial dining habits support this growing demand, but it was surprising to see that older generations actually spend more money overall at restaurants than millennials. The report notes that “This implies more growth for restaurants as millennials age and earn more.” Following this logic, it also makes sense why CBRE selected Denver as one of the secondary urban markets that is best positioned for restaurant spending growth. We certainly are leading the way when it comes to fast casual. The number of quick-service restaurants in Denver increased by 67 percent in 2015 compared to the previous year, according to CBRE research. In the report, Denver joined Minneapolis, Baltimore and Philadelphia as the best-positioned cities for restaurant spending growth, thanks to reported high job, income and population growth in each city. I found the four up-and-coming restaurant formats identified in the report to be extremely interesting, because Denver has already embraced many of them. All four formats appeal to modern diners looking for diversity, convenience, uniqueness, relative affordability and experiential focus, the report stated. The formats include: • Food trucks • Food halls • Celebrity-chef restaurants • “Grocerants” – grocery stores that offer prepared foods and made-to-order meals. While restaurants still are a gamble – thanks to high failure rates and substantial tenant improvement requirements – the report identified one way retail owners are taking a chance. “One solution CBRE has seen property owners undertake is to forego immediate repayment of build out costs or to keep base rents low in exchange for an ownership stake in the restaurant,” the report said. “In that approach, the property owner received a share of that restaurant’s profit even after the initial investment is repaid, thus providing the property owner a return on its assumption of risk” I’m curious how Denver restaurateurs, and those who rent to them, will continue to be on the forefront of dining experiences, embracing new formats while also celebrating what already works well. Whether you love the fast-casual environment, love to explore hip new spots or love to pick your meal from whichever truck is parked nearest you, one thing is certain – anyone living in Denver who is not exploring the restaurant scene is missing out. Happy dining!