The restaurant segment is one of the most prevalent groups of retail tenants in the Southern California market, according to CBRE research. A representative of the firm has released a statement that says more than 400 food-service leases were signed in SoCal in 2017, totaling nearly 900,000 square feet.
CBRE reports that most of this record restaurant activity was driven by full-service or sit down restaurants, followed by fast-food and fast-casual dining and that in the last year, Southern California residents spent more than $25.2 billion on eating establishments, roughly $4,334 per person on average annually.
According to CBRE’s statement, “The 14.6 million adults that make up most of the region’s population are ditching the banality of cooking in favor of a unique culinary experience. Millennials in particular typically spend 50 percent of their income on dining out.”
The report says a variety of factors are driving these residents to opt for restaurant meals, including hectic schedules, the general strength of the region’s economy, the resulting buying power of its residents, and a desire to break the monotony of the nightly ritual of cooking at home. “This scenario has become quite commonplace lately, and the desire for eating dinner out has had a profound impact on the region’s commercial real estate market.”
Restaurant patrons are seeking out a wide range of restaurant options, from the familiar to the exotic, the report continues. It says an example is TRADE, a food hall based in Irvine, California, with an “open-air design, a variety of communal seating, and up-and-coming chefs that can adapt to changing trends.” CBRE says, “TRADE is an example of experiential retail that has tapped into the needs of young adults and professionals.”
Catering to the needs of SoCal restaurants requires different skills than serving other retail tenants, as Emily Iseminger, SVP of brokerage services in The Woodmont Company’s Newport Beach, California, office, recently told SoCal Real Estate. For example, special needs for quick-serve restaurants are patio space in the design of the building. “Patio space drives sales, and higher sales increases the rent that the tenant is willing to pay.”