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Restaurants Increase Their Share of Retail Space Led by Growth in Sit-Down Eateries

Over the past few years, eating out has become increasingly more popular. We thought you’d be interested to know how this trend can help you increase foot traffic and sales, ultimately enhancing the value of your retail space.

Photos Courtesy of CoStar.

It’s no secret that many national restaurant chains have run into financial trouble over the past several years.

Bertucci’s, Subway, Applebee’s, IHOP and Chipotle are just a few of the big-name restaurant chains who announced more than 700 closures in 2018 alone.

Eating out is more popular among Americans than ever, and the share of restaurants among all retail space is not declining, despite all of the high-profile restaurant closings.

In fact, the food industry has been steadily growing, with sales of at-home and away-from-home food expenditures both on the rise.

In 2016, consumers spent more on food away from home annually than for food at home for the first time.

The spending gap increased to $7.9 billion in 2017, and the trend has continued so far in 2018.

In 2016, sales of away-from-home food surpassed sales of at home food for the first time.

In 2007, food and beverage tenants accounted for less than 10 percent of leased retail

space. In 2017, the amount of retail space leased has grown to 11 percent.

Retail tenants within the Food & Beverage category increased the amount of space leased compared to 2007 levels.

Health and fitness, food and beverage, and discounters were the three that saw a positive change in market share based on square feet leased.

Food and beverage accounting for over seven million square feet of new leases over the past seven quarters.

Among other retail categories, those in the general retail and apparel group saw the sharpest decline in share of leased space from 2007 to today.

Fast food and chain restaurants are hurting, but sit-down restaurants in general are doing well.

Focusing on restaurants located in regional malls, super-regional malls and lifestyle centers, sit-down restaurants have seen the largest growth in share.

Sit-down restaurants accounted for more than 64 percent of leased restaurant space since 2017, up from 50 percent in 2007.

The other restaurant segment that increased its space share is Bars, although it has the smallest share of all restaurant types in malls.

Fast food restaurants saw the sharpest drop, falling from a 35 percent share in 2007 to 26 percent.

Malls have expanded their sit-down restaurant offerings.

Looking exclusively at malls, for the first time in recent record the number of sit-down restaurants has almost surpassed the number of fast food restaurants.

The value of restaurants in today’s malls is twofold. For some, sit-down restaurants can be an effective way to back fill vacant space. For others, sit-down restaurants help to realign the tenant composition in favor of more experiential and mixed-use retail sites.

Many owners view the closures of department stores and apparel retailers as an opportunity to draw tenants from retail segments experiencing higher growth.

Those centers that are allocating space to sit-down restaurants may be better suited to drive foot traffic and retail sales, enhancing the value of the asset in today’s investment marketplace.

2019 CoStar.

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