Last year, Phillips Edison & Co. reviewed its portfolio, but it wasn’t the standard search for properties to sell or redevelop. “We focused on our entire portfolio, going property by property, to look at each space and ask, ‘Is there a way to get a drive-thru here?’” said Jeff Edison, chairman and CEO of the REIT, which owns and/or manages 309 grocery-anchored shopping centers.
From the beginning of COVID-19, PECO recognized that shoppers were prioritizing safety, he says. “Drive-thrus are a great answer for that. In fact, certain merchants now believe that having a drive-thru is critical to their business. They will not open a new location without one.”
How long and how much?
So far, 50 drive-thru and pickup windows have been added at PECO properties, and 30 more are under construction or in design. PECO has funded some of these projects outright in exchange for higher rent or a percentage of sales. In other cases, it provided partial funding or just did consulting work related to construction or government approvals.
Adding a drive-thru to a grocery-anchored center requires more time, money and effort than some expect, Edison says: 60 days to 12 months and $10,000 to $100,000. It also often requires a crossfunctional team of asset managers, leasing agents, construction specialists and marketers.
If an asset manager identifies an end cap, fast-casual restaurant that could benefit from a drive-thru window, he says, the next steps could involve:
bringing in construction experts to determine whether the change would be safe and viable
negotiating financial terms and logistics with the restaurant owner
amending the lease to reflect those discussions
securing any necessary government approvals
supporting the tenant’s marketing of the new drive-thru window
“It’s really about fitting all of those pieces together,” Edison said.
The proof is in the leasing
Jason Cole recently signed a lease at PECO’s Murphy Marketplace in Texas for his Sweetwaters Coffee & Tea franchise. The availability of drive-thru service cinched his decision. Founded in Ann Arbor, Michigan, Sweetwaters offers cafe fare, coffee and tea. “Down in Texas, everything is more spread out compared to up north where the Sweetwaters franchise started,” Cole said. “Folks just tend to drive everywhere.” That is even more the case in the time of COVID-19. “Behaviors have changed, and a drive-thru can make all the difference during a pandemic.”
The convenience imperative appears here to stay, too, and PECO will continue to look for ways to add drive-thrus wherever possible. “This is not a one-time thing,” Edison said. “It’s something we’re committed to long term.”