by Garrick Brown, Vice President & Head of Retail Research, Americas
The retail marketplace is always evolving and changing, but thanks to the accelerated rise of eCommerce, the retail landscape in the U.S. is currently undergoing a seismic shift–the likes of which we haven’t seen since the rise of the suburbs began in the late 1950s. Faster delivery times, cheap or free shipping, wider selections, better platforms and greater consumer reliance on technology have all meant that eCommerce has emerged as the go-to form of retail for shoppers seeking convenience. Against this backdrop, bricks-and-mortar retail has seen a slew of major retail categories go into contraction mode as retailers ranging from small upstarts to globally iconic brands seek to build their omnichannel presence while reducing their actual physical footprints. The result has been that we have tracked over 4,000 announced closures from major retailers in 2016. This is the largest amount that we have recorded since 2010, when the market was feeling the brunt of the Great Recession. And yet, despite all of the challenges presented by the disruptive impact of eCommerce, overall shopping center vacancy in the United States has only been minimally impacted by this most recent wave of closures because of growth coming from other categories. In other words, the marketplace is evolving, surviving, and in many cases, thriving.
The rise of eCommerce has paved the way for a renewed emphasis on the actual retail experience itself. Physical retail today is now about either the shopping experience or it is about the discount and this is reflected by who is still growing in the bricks-and-mortar marketplace. While department stores and apparel players continue to close stores, discounters, dollar stores and off-price apparel concepts remain in aggressive growth mode. But when it comes to experiential retail, no category even comes close to restaurants when it comes to growth.
Restaurants are now accounting for roughly half of all the planned retail unit growth in the United States. In 2010, this category accounted for roughly one third of it. Meanwhile, Americans are eating out now more than ever before. According to the Commerce Department, in April of this year consumers spent more money purchasing food at restaurants than at grocery stores for the first time in U.S. history. That trend has continued to gain momentum in each month since. The rise of “foodie culture” over the past two decades has been one of the primary driving forces here with the strongest growth coming from new concepts focusing on quality, authenticity and source-ability. The explosion of restaurant growth has been largely driven by new, affordable but quality-conscious fast casual chains and by farm-to-fork, chef-driven concepts across virtually every marketplace in the nation. At the focal point of that movement, particularly in urban areas, has been the rise of the food hall.
This “new” property type is really a return to the urban markets of the past, with a few upgrades. While their sizes can vary drastically (the “mini food hall” of 10,000 square feet or less is now arguably the hottest segment of this market), these projects tend to share a few key characteristics. They readily embrace concepts like sustainability, “farm-to-fork” and the “slow food” movement. They offer a diverse mix of prepared and unprepared foods typically from upscale, artisanal or organic sources. They focus on quality and affordability. And, most importantly, they connect with their core demographic: the millennial consumer. And this new property type is in rapid growth mode. In just the first nine months of 2016, the number of existing food hall projects in the U.S. increased 37.1%, and there are more in the development pipeline. As strong as recent growth has been, it is only just the beginning.
To find out more, click here for our new report, The Food Halls of America.
Garrick serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.