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How the Pandemic Reshaped Restaurant Real Estate

by Kianna Warburton

The landscape for commercial real estate has undergone significant changes in recent years, and the COVID-19 pandemic has only accelerated these transformations. One industry expert, RJ Hottovy, the head of analytical research at Placer.ai, has witnessed these changes firsthand and asserts that there is currently a high demand for commercial property, particularly in the restaurant sector. Hottovy notes that there is a tremendous amount of demand for new restaurant concepts, as well as existing ones that continue to innovate.

In a recent webinar hosted by Placer.ai, the impact of post-pandemic shifts in consumer behavior on restaurant operators’ real estate strategies was examined. One significant change discussed was the population shift to America’s Sun Belt, which has made markets like Scottsdale, Arizona, extremely popular. The mass influx of population to states such as Texas and Florida, as well as the Phoenix area, has made Scottsdale a thriving market for restaurants.

Additionally, the webinar highlighted several industry trends that have emerged in response to changing consumer behavior. First, suburban and rural areas, which typically offer cheaper rent, are becoming increasingly appealing to restaurant chains. Chains like Chipotle have found success in markets with less than 100,000 residents due to higher visitations per location and less competition.

Furthermore, the webinar panelists noted the proliferation of drive-thru lanes in the quick-service restaurant (QSR) industry. Chains like Shake Shack are incorporating as many as four drive-thru lanes into their new locations to cater to consumer demand for convenience. This trend is expected to continue as interest in drive-thru options remains high.

While traditional indoor malls are losing relevance, outlet malls and “lifestyle centers” have captured the attention of modern consumers. The role of the American mall has evolved, and these new projects offer a mix of shopping, dining, and entertainment, resulting in increased dwell time. The webinar panelists cited an example of a local lifestyle center with a dwell time of 80 minutes, surpassing traditional retail centers that have been around for decades.

Finally, convenience stores, such as Wawa and Sheetz, have invested heavily in their food platforms in recent years, adding features like pick-up windows and mobile ordering. These investments have paid off, as these convenience stores have experienced an increase in visitations, particularly during the evening daypart. The popularity of these stores, especially among younger generations, has contributed to their success.

In conclusion, the landscape for commercial real estate in the restaurant industry has undergone significant transformations in recent years, driven in part by post-pandemic changes in consumer behavior. Suburban and rural areas are becoming more appealing to restaurant chains, drive-thru lanes are proliferating, lifestyle centers are reimagining the traditional mall experience, and convenience stores are expanding their food platforms. As the industry continues to evolve, restaurant operators will need to adapt their real estate strategies to meet the changing demands of consumers.

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