Restaurant Real Estate in 2024

by | Mar 13, 2024 | blog, Business, Grand Opening, Industry News, operations, supply and demand, Trends | 0 comments

The restaurant and hospitality industry is interconnected with many other major industry groups—the most intimate of which is real estate. At National Restaurant Consultants (NRC), our expertise and business-minded thinking takes us beyond restaurant trends and food prices; we also are keeping an eye on trends in other areas that we know will directly impact the health of the restaurant industry and, most especially, our clients. 

This is why we are keeping a careful watch on commercial real estate, which has been up and down since the pandemic. Current trends and expert reports are telling us to prepare for a challenged real estate market through 2025, according to this article from Nation’s Restaurant News (NRN). The troubles are rooted in supply-and-demand issues, and in particular, a stalling in shopping center development, the article explains, citing observations from David Orkin, EVP and restaurant practice leader for real estate services firm CBRE.

It’s going to remain challenged due to supply and demand reasons,” Orkin said. We haven’t had much development in the past half a dozen years, and so we’re at an all-time low.”

Shopping center development continues to be hamstrung by limits from the coronavirus pandemic, he added.

In shopping center development construction,” Orkin said, costs are up because of the pandemic. Nobody really turned development back on from three or four years ago. But now we’re seeing where there is a ton of demand both for retail and restaurants.”

CBRE predicts “U.S. office vacancy will peak at 19.8% in 2024, up from 18.4% in Q3 2023 and 12.1% at the end of 2019,” states the NRN post, and that “office construction will slow to the lowest level since 2014, raising the prospect of a shortage of available Class-A space later in the year.” This will have the greatest impact on new restaurant projects looking for space. “Companies seeking blocks of office space of less than 20,000 square feet will account for the bulk of leasing activity.” 

Office space numbers align with CBRE’s forecast for retail availability. The “long-running lack of new retail construction will contribute to retail availability rates declining by 20 basis points in 2024 to 4.6%. CBRE foresees retail spending moderating to 2.6% in 2024 from 4.4% in 2023, and net absorption — which is new demand for retail space — declining to 28 million square feet from 35 million square feet a year earlier,” cites NRN.

However, despite the obvious challenges ahead, CBRE has a positive outlook for the restaurant industry’s long-term health. There is a bit more real estate pain ahead, but stabilization and the early stages of recovery are not far behind that,” said Richard Barkham, CBRE global chief economist and global head of research, in a statement. Investment volumes will be down overall for 2024 but will start an upturn in the second half. And leasing activity will pick up a bit from a sluggish 2023.”


NRC principal and owner Richard Weil, says, “The key is: operators should not lose sight of the tried and true standard— highest of priority to ‘LOCATION, LOCATION LOCATION’!”

If your new restaurant project is seeking space, work with one of our restaurant consultants to navigate this year’s challenged real estate market. If you have an existing restaurant, hang on to your location and instead work with our consultants to improve on its design and technology for the best working conditions and guest experience.

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