A Shift Is Coming For Food-and-Beverage Real Estate Article originally posted on Globe St. on April 16, 2019 A significant shift is underway for the US restaurants and grocery industries and the real estate these operators occupy, according to a new CBRE analysis. These changes include a greater push for convenient, prepared foods, a growing millennial influence, and the emergence of inner-ring suburbs as the industry’s hottest market. In short, new consumer preferences are expected to influence many facets of retail real estate, including store location and store design, according to David Orkin, an EVP leading CBRE’s Restaurant practice in the Americas. Increasingly stores will find it is essential that they accommodate delivery pickup or prepackaged meals as well as automated ordering and self service, he said. “The food-and-beverage category claims nearly 25% of retail sales in the US, and few other sectors have expanded their presence in shopping centers as quickly as restaurants and grocery stores,” said Melina Cordero, CBRE Global Head of Retail Research, in a prepared statement. “But this sector is just as susceptible as others to sweeping demographic changes, which we’ll see influence real estate through formats such as grocery-restaurant combinations, more kitchen-only outlets and delivery services.” According to CBRE: Neighborhoods on the edge of the urban core will become even hotter F&B destinations Much densification is occurring in inner-ring suburbs. In turn, restaurants, bars and grocery stores are ideal anchors for mixed-use complexes developed in these neighborhoods, serving as gathering points for residents and employees alike. Due to their location, these inner-ring suburbs get the dual benefit of higher food-and-beverage spend by suburban households. Few first-ring suburbs have the higher lease-rates typical of urban cores. The growth of single-person households will boost demand for convenient dining The percentage of single-person U.S. households rose to 28% last year from 17% in 1969, with growth across most age groups, according to Commerce Department data. That, coupled with a rise in dual-income households, means people have less time to prepare, cook and clean up meals. Among the real-estate implications of this shift are added momentum for convenient F&B formats like fast-casual and fast-food restaurants, and inclusion of bars and restaurants in grocery stores to offer made-to-order, higher-margin fare. Some restaurants are adding kitchen-only locations catering solely to delivery and carryout customers. Spending in restaurants and grocery stores will outpace other soft-goods categories for the next five years The food-and-beverage category’s share of total US retail sales has grown to 24.3% in the past 10 years from 22.7% in the eight years prior to the recession, according to Commerce Department data. Meanwhile, the category sees lower e-commerce penetration than most others. Those factors have resulted in restaurants, bars and grocery stores claiming an expanding share of retail real estate. According to the International Council of Shopping Centers, the food-and-beverage category, US mall square footage dedicated to restaurants–excluding food courts–increased by 18% since 2007 to 43 million square feet. Millennials’ spending on F&B will exceed all other generations within 10 years Millennials dine out more than other generations, but they’re thrifty diners. Currently, Baby Boomers collectively spend the most on food and beverage, and Gen Xers spend the most on a per-household basis. However, millennials’ wealth constraints will ease over the next decade as they pare their debt and their income grows, resulting in millennials spending more on food and beverage, sometimes in volume and sometimes in price. Boomers, meanwhile, are likely to spend less as they progress in retirement. These shifts underscore the need for retailers and retail-center owners to analyze and understand their customer base, often through location-analytics technology, so they can tailor their menus and store locations accordingly.