5 Shifts in Restaurant Real Estate for 2022

We have always kept an eye on what changes are happening in the commercial real estate market here, even before launching Rock City Commercial, our commercial real estate venture. Analyzing the market is always a good way to understand how restaurants and small businesses are changing in the city, and ultimately, what areas will grow and what will decline.

In 2021 we saw the fewest restaurant openings across the metro area since we started in 2011. This was in large part to openings being put on hold or cancelled due to the ongoing pandemic, but also being put on hold due to the 30-crossing construction and waiting to see how the completed project will impact areas like the River Market and the 6th street/East Village corridor.

So what is in store for 2022? Here is what we are expecting.

More Openings
For starters, there will be many more openings in 2022. Several projects decided to hold for 2021 because it made more financial sense to hold than open with uncertainty. That dynamic will change for 2022, several of these projects cannot wait on it for another year. So expect to see a lot of announcements around February/March, whenever the current COVID variant starts to die down.

Shift to Smaller Footprints
One of the big things we have seen in the post-pandemic era when talking to businesses about locations is a shift to smaller footprints for dining rooms. Having capacity restrictions, complete shut downs, and rapidly changing business models forced a lot of restaurants to re-think dining. Many have seen that they can operate with a smaller dining room. Where pre-pandemic we were looking at 80-100 seat restaurants as an average, now it is 30-50 tops, some places even questioning if they need a real dining room at all. I fully expect new opening restaurant footprints to shrink on average this upcoming year.

Shifts to Service Model
The other big thing is a change to service models. Staffing fluctuations have been the other big impact the pandemic has brought. To overcome that, many restaurants shifted from full service models to counter service. I expect anything casual or under an average ticket price of $25 to continue to go that way, especially for these smaller footprint dining rooms. It has simply become too hard for many businesses to staff a 40 table restaurant.

Local Restaurants Prioritize Drive Thru
The #1 request I am getting when talking with real estate clients lately is a location that has an existing drive thru or one that is easy to add. Chain restaurants have known this for a while, but the easier to pick up food the more people are going to show up. There is still a significant amount of customers who do not feel comfortable going into a sit down restaurant. Despite curbside getting easier, it is still a mess of a service model for most locally owned restaurants. Adding a drive through option at a location, especially for fast casual, can easily increase sales by 30-40%. In fact we are actively looking for several for commercial clients right now, and building out online ordering for others that are looking to utilize their drive thru more efficiently.

A Shift to Ownership
A couple of years ago I was having a casual conversation with a large restaurant group owner and he was talking about the group’s shift to owning rather than leasing. It was after a couple winter weather shutdowns and he said to me “when I am leasing the building owner is making money 24/7, regardless of if we are making money or not. At least owning I have equity building while I lose money.” It took a couple of years to hear that same sentiment again, but I am hearing it a lot lately following the restaurant restrictions and shutdowns. More restaurateurs, who can afford to, are choosing to buy instead of lease because it makes more sense long term. Some are even prioritizing buying over preferred locations.

We are constantly monitoring the market and trends. If you are interested in opening a restaurant and want us to help you find the perfect spot our Rock City Commercial program is great for you, contact us for more info. 

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