Restaurants Are Philly's Saving Grace In Retail

Philadelphia's retail market has shown positive signs this year overall, but it is becoming increasingly dependent on food and beverage.

Since the beginning of 2016, 125 restaurants opened in Downtown Philadelphia, while only 23 closed or relocated, according to a CBRE market study. Food and beverage uses accounted for nearly half of all retail leasing CBRE has brokered in the area over that period.

"[It] is no exaggeration to say that the F&B sector is leading and redefining Downtown Philadelphia’s retail landscape," the report said.

In the suburbs, the picture is similar. Newer shopping centers, such as the King of Prussia Town Center, are 26% occupied by restaurants, and that share is growing. In Greater Philadelphia shopping centers, F&B rents have set a record by crossing the $40/SF threshold, nearly double the post-recession low in 2011.

Philadelphia's market seems to support such trends, with its citizens spending the fourth-largest share of their collective income on eating out among the 16 largest markets in the country. Restaurant pricing increased 14.5% from 2010 to 2015, which is fairly in step with the median income's rise of 11% in that same period. New York, Washington, D.C., and Chicago all have bigger disparities.

Casual dining has been the biggest beneficiary of eating out's rising influence in Philadelphia. Combined with its subgenres — fast-casual and polished casual — it makes up 72% of Downtown Philly's restaurants, as millennials have grown to 48% of the area's population and assert their preference, especially in University City.

Neighborhoods like Fishtown, Northern Liberties and Old City have established themselves as the city's leisure destinations, and as such have the three largest percentages of drinking-focused establishments among Philly's central neighborhoods.

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