By Bob Kane, Director, and Jessica Branch, Associate, Franklin Street
News stories are swirling that Atlanta may soon become “over-restauranted.” However, recent data on this topic show mixed results. For example, Atlanta third quarter 2017 restaurant sales volume increased 1 percent compared to the third quarter of 2016 – the first positive market sales increase shown in the last 12 months. Of the 96 non-franchise Atlanta restaurants surveyed by NetFinancials, 57 percent reported positive sales in the third quarter of 2017, compared to only 38% in the second quarter. However, restaurant traffic declined 4.1 percent nationally in the third quarter.
These figures may indicate that Atlanta is not yet saturated, but rather that the restaurant market has regained its footing and sales are slowly growing again. Restauranteurs seem to agree with this theory as the number of new eateries in the market continues to surge. Atlanta’s total number of restaurants increased by 910 from 2015 to 2016, both from local chefs and national and regional chain concepts, according to the Bureau of Labor Statistics. In fact, more than 50 percent of all retail lease transactions finalized are restaurants, especially in Atlanta’s core submarkets. So for 2018, what food trends should commercial real estate players keep their eye on?
Attracting Millennials: With the millennial generation (Generation Y) making up over 20 percent of current retail market spending, young adults are shaping the way that chefs and chains create new culinary concepts and choose future locations in which to open. Millennials have significantly increased the demand for unique and more personalized dining experiences. Former industrial areas, like Atlanta’s Westside, are rapidly transitioning to cater to these weekend bar-and-restaurant-goers, because millennials spend most of their expendable dollars eating and drinking in hip social environments.
Social Media Upgrades: A restaurant’s social media strategy has become equally as important as choosing the right location for determining its success when entering a new market. Geotags, electronic tags that associate precise geocoordinates with web pages or other digital content, have risen in popularity, and retail shops are also stepping up their social media presence to help draw crowds to trendy hotspots around the city.
Going Healthy: “Sustainable” and “organic” are two of the hottest catch words that are luring in new restaurant clientele. With fitness and nutrition becoming a daily conversation among friends and coworkers, and boutique fitness studios constantly popping up, diners want to eat at spots that offer all-natural, clean ingredients, so their meals align with their exercise habits.
Rents Rising: With limited new supply of real estate opportunities for restaurants, and the continued demand from new restaurant concepts entering or growing in the Atlanta metro market, leasing rates continued to increase in high demand retail corridors in 2015-2017. In some cases, rents have increased above $50 per square feet in suburban Metro Atlanta Markets. Expect prices to remain the same throughout 2018 as the cost of new development land and construction continues to push pricing to all-time highs.
Bob Kane is a Director with Franklin Street’s Retail Tenant Leasing team in Atlanta offering program roll-out strategies, site selection, market analysis and lease/purchase negotiations for national and regional retailers and restaurant groups expanding throughout the Southeast. During his career, Mr. Kane has provided brokerage, development and consulting services to some of the nation’s largest retailers including: Home Depot, Kohl’s, Longhorn Steakhouse, McDonald’s, Aldi, Lowe’s and more.
Jessica Branch is an Associate with Franklin Street’s Retail Tenant Services team focusing on tenant representation in Atlanta and working with a variety of commercial real estate owners and developers. Ms. Branch specializes in retail/restaurant leasing, and site selection for local, regional, and national retail clients.
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