Cameron Sperance | Bisnow | June 17, 2018
The restaurant industry was the perceived saving grace of shopping centers during the retail apocalypse. When mall owners were faced with the conundrum of how to fill vacant spaces, food and beverage concepts were a viable solution. But now even restaurants are facing a wave of closings due to overexpansion, especially midpriced casual chains like Applebee’s and Ruby Tuesday. While the formerly reliable sector suffers, continued consumer demand for locally sourced, small-scale fast-casual restaurants is garnering the attention of developers looking for new tenants — even if they aren’t as well-known as the industry’s bigger, high-credit chains.
“The idea now is that property owners are underwriting their projects with the understanding they won’t be reliant for rent on those particular spots,” JLL Retail Director of Research James Cook said. “If you look at retail as an amenity, there’s some cost in putting that in, and you might just break even with the retail rents. But if you have attractive retail and a multifamily component, it boosts those multifamily rents — the same with an office.”
The market is adjusting in favor of independent restaurants and fast-casual brands with organic or local ties that millennials crave. Fast-casual, upscale-casual and fine dining were the restaurant industry’s leading performers in 2017 and have continued to post strong sales in 2018. Fast-casual brands have increased growth by 2% since 2017, according to TDn2K Black Box Intelligence data, and developers continue to take on the financial burden of bringing these companies to a variety of properties.
“We’re certainly seeing that there is a shift in the way mall owners are looking at integrating food to their asset,” JLL Retail President Naveen Jaggi said. “The food court today in a nice mall is much more locally driven than Chick-fil-A or Chipotle. There is a greater desire for authenticity not just for a mall owner but for the consumer.”