What's Trending in Real Estate in February 2023
Commercial Real Estate Pros Look at What’s Next for the U.S. Office Market
In a look ahead to the U.S. office market in 2023, CoStar asked three commercial real estate leaders for their thoughts on the coming year: Aaron Jodka, national director of capital markets research for Colliers; David C. Smith, vice president and global head of occupier insights at Cushman & Wakefield; and Julie Whelan, global head of occupier thought leadership at CBRE. The three shared their outlooks on hybrid work, the so-called “flight to quality,” the future of central business districts and more. Other topics included lease sizes (smaller) and lease terms (shorter); what will attract workers back to the office; converting office buildings to other uses (apartments); valuations; how, for the first time, suburban vacancies have fallen below vacancies in central business districts; and, of course, much more.
Beyond Meat Looks To Sublease Its California HQ as Sales Decline
After the initial flurry of enthusiasm for meatless meat substitutes, things have slowed considerably for the pioneers in this sector. One of those pioneers, Beyond Meat, has placed more than 50,000 s.f. of its El Segundo headquarters on the market for subleasing. In 2021, buoyed by that early enthusiasm, the company signed a 12-year lease for 280,000 s.f. in Southern California. Retrenching after a 22.5% drop in revenue in Q322, the company laid off 200 employees, nearly 20% of its global workforce, and its share price fell about 70% in the past year. Also see this article from last September titled, “The plant-based meat boom is over,” which discusses the decline in the prospects of other meat substitute brands in the U.S. and abroad. Or this article from January titled, Fast-Food Restaurants’ Embrace Of Veganism: Kinda Slow. Then there’s this: Cell-cultivated meat is the next big protein alternative.
How the Pandemic Has Altered Restaurant Real Estate Planning
Among the many changes wrought by the pandemic, in-house restaurant traffic likely will never be the same. On-premises dining today is off 16% from before the pandemic. Meanwhile, off-premises dining has risen by about that same amount, according to the National Restaurant Association in a recent article in the Washington Post. Within that 16% rise in off-premises business, delivery is up more than 5%, carryout is down 3%, and drive-thru is up 13%. And, according to an economist for the NRA, 39% of all restaurant traffic is coming through the drive-thru lane. Yes, 4 out of 10. As these trends continue or even accelerate, QSRs are slimming down and no longer competing for the “A” spaces they used to, creating disruptions to the pre-pandemic status quo. “We are going to see a hollowing-out in the restaurant world,” said Laurie Thomas, owner of two restaurants in San Francisco and executive director of the Golden Gate Restaurant Association. “We will end up with the super-expensive, bespoke opportunities that you’re paying through the nose for, and then you’re going to have the fast casual restaurants. The middle restaurants will be much fewer. It won’t be an economically viable part of the industry going forward,” she said.
Chili’s Closes Its Delivery-Only Test Store After Just 2 Months
In mid-January, Chili’s Grill & Bar shut its delivery-only test unit, which it opened in November near the campus of Southern Methodist University in University Park, Texas. The 1,600-s.f. footprint is less than one-third the size of the brand’s traditional 5,500-square-foot building. In a November article in Nation’s Restaurant News, a Chili’s spokesperson said the brand’s Delco unit provides “the opportunity for Chili’s to break into locales too small” for traditional restaurants and “opens a large addressable market by thinking differently—with off-premises being a third of Chili’s sales.” After shutting down the experiment last month, a Chili’s spokesperson said, “We recently closed our Chili’s delivery/carryout location on Mockingbird near SMU to strengthen the core Chili’s business and focus on innovation within our four walls.” Instead, the company plans to double down on its Kitchen of the Future, improve its digital properties, and focus its menu on its “core four” (Big Mouth Burgers, fajitas, chicken crispers, and margaritas.)
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