You know the opportunity is there. But how do you get out of your way and take it?
The disruption of on-demand digital business models is not a new phenomenon. But a burgeoning crop of business concepts offers a growing number of emerging real estate opportunities that are getting a boost in the era of the pandemic.
Flexible, long-term rentals, offering temporary stays for guests and travelers somewhere between Airbnb weekends and year-round leases, as well as the continued proliferation of ghost kitchens and on-demand dining, can be useful ways to lease or reposition actual underperforming rentals. real estate, but only for brokers and commercial real estate professionals with the right skills.
“It requires someone who is able to play a role and able to learn multiple industries and blend them together to provide a new kind of service,” said Randall Cook, CEO and co-founder of Method Co., the company. who created Whyle. “In our case, you have to understand how people use real estate, but also the hotel industry. It is a unique challenge; customers need something that you would find in a typical apartment, and on the other hand, sometimes they expect it to be like a hotel.
Whyle operates a rental brand with more flexible rental terms than typical long term stays.
The heart of the challenge is to make sense of new, often evolving business models. Longer-term stays, for example, see new life in markets across the country as business travelers mix business and leisure travel, and a segment of high-end tenants, faced with the uncertainty of the pandemic era, are increasingly interested in try cities with new rental options.
“Real estate brokers and homeowners need to recognize the way people interact with consumerism has changed, as has the dining experience, with an increase in the number of consumers wanting to eat their meals at home,” said Atul Sood, Director Commercial of Kitchen United. ghost kitchens. “At a time when there is a lot of distressed real estate, these industry professionals should be looking at business models that can help revive their spaces and sign longer leases.”
The Pasadena, California-based company operates or is opening 18 locations nationwide.
CBRE Senior Vice President David Freitag, who helped sign a deal for Colony, a ghost kitchen concept on Santa Monica Boulevard in west Los Angeles, said the most important thing for professionals to real estate interested in space is education. These concepts and opportunities for existing customers should be part of everyday conversations. Analysis of the data by Euromonitor suggested that ghost kitchens, which today have around 1,500 locations in the United States, could be a trillion dollar industry by 2030.
“Make sure to raise these types of opportunities and questions with your clients,” Freitag said. “How can they take advantage of this trend? I absolutely want to lead the discussion.
Courtesy of Method Co.
A model unit for Method Co.’s Whyle short-term rental concept.
Another important facet of engaging in these new business models is training consistently and not overestimating your understanding of operations and customer attraction and retention. For Whyle, operated by Philadelphia-based Method Co., Cook said there are key economies of scale and methods of attracting customers that make it difficult for small, multi-family homeowners to convert units on their own, or just try this model with a handful of flats. . Marketing these spaces and furnishing them can be difficult to do unless you understand or make a commitment.
“The best scenario for owners who want to get started is to hire someone who does it full time,” he said. “It requires active and practical management.
The ghost kitchen space also requires specialist understanding, especially with regards to nuances of zoning, entry and exit for customers and delivery drivers, and licensing and health requirements, because many kitchens will be compacted into a small space. Space configurations and operations also vary widely, as some operators stick strictly to delivery and pickup, while others, like Kitchen United, are more omnichannel, building locations in food halls. and pre-existing restaurants.
Sood said Kitchen United was looking for space in “urban, dense and demographically rich nationwide,” resulting in an existing retail space of around 6,000-10,000 square feet. close to urban areas, colleges and universities, which also have access to main roads and parking spaces for walking around -up customers, delivery drivers and loading areas for trucks.
Both of these models, the Mid-Term Stay and Ghost Kitchens, have robust expansion plans. Kitchen United will open locations with Kroger and Ralphs grocery chains, Los Angeles-based food halls, and add spaces in 20 more locations nationwide in 2021, with aggressive expansion in LA, New York and in Texas in 2022.
Whyle, which currently operates 225 units in Washington, DC, plans to triple in size roughly over the next two years and add markets such as Atlanta, Detroit and Baltimore.
What these models present is potential, especially for underutilized multi-family or commercial spaces, an opportunity that requires work and research. It is rare to sign short-term agreements for either type of space on an experimental basis. (Freitag said ghost kitchen space catering concepts typically sign one- to two-year deals.)
With this bullish view of the market, Freitag believes it is vitally important that commercial real estate staff understand the potential. The ghost kitchen model gives restaurants the ability to refine menus, expand existing full-service restaurant locations, and make existing restaurants more lucrative. (Large multi-site restaurant groups are all exploring how they can use this concept.)
Dismissing these changes as temporary fads could mean missing out on potential fundamental changes in restaurant real estate.
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