People Spend More At Restaurants Than Grocery Stores. What Are The CRE Implications?
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The impact of this food evolution on commercial real estate brokers filling vacant retail centers is obvious, and CBRE said the overall impact on the grocery industry is just beginning.
Ignoring food and beverage tenants is almost foolhardy, considering CBRE data shows nearly a quarter of every retail dollar spent in the U.S. last year fell within the food and beverage segment. Food and beverage retail account for $1.5 trillion of all U.S. retail sales, CBRE said in its 2019 U.S. Food In Demand Series: Consumers Report.
The share of U.S. food and beverage dollars spent at restaurants outpaced dollars spent at grocery stores for the first time in 2016, CBRE said.
In 2016, 50.3% of food and beverage dollars went to restaurants, while consumers spent 49.7% of their F&B dollars at traditional grocery stores.
So what does this tell us?
Demographics are quickly shifting, CBRE said, and as millennials increase their market share, food concepts that focus on convenience, home delivery or expediency will win out over traditional food and beverage concepts.
The strongest concept is the fast-casual restaurant segment, particularly those restaurants that cater to millennials and single-person households in suburban areas.
“Fast-casual is really leading on average in my opinion on a per square foot basis,” CBRE First Vice President Taylor Roberts said. “Their sales are stronger than the historical casual diners that a lot of the suburban settings have seen at times.”
These trends will not just affect what type of restaurants developers pick for their projects, they also will impact how grocery stores position themselves to millennials in the future.
CBRE predicts grocers will develop more space inside their outlets to offer prepared foods — maybe even in-store casual dining experiences — to cater to crowds that demand meals on-the-go with little to no inconvenience.
The baby boomers spend the most on food today, but their segment will be outpaced by millennials in 10 years, according to CBRE. As this shift occurs, developers should ensure restaurants they select prioritize convenience in terms of delivery and to-go options.
The commercial real estate firm predicts demographics and price trends will push demand on the restaurant side and force restaurants to employ tech and automation solutions to control costs.
The millennial generation contains more single-person households than past ones, CBRE said, with 45% of households in larger cities made up of single adults. This alone will shift demand in the food and beverage category to fast casual dining experiences or pickup orders.
“People living alone, with sole responsibility for food preparation and clean-up, are more likely to seek time-saving cooking options, such as prepared food and meal kits, and dining-out options,” CBRE said in its report.