The rising importance of food and beverage (F&B) in retail place-making has been well-documented over recent years. Everywhere you look more, and better, food offerings are cropping up in shopping centres and retail schemes across the world.
This is the first in a series of blog posts from JLL that will explore some of the key drivers behind this trend and the implications for retail property owners, as well as delving into the future challenges facing the industry as explored in the 2017 ICSC ‘Successful integration of F&B within retail real estate‘ report.
What is driving the trend for more food?
While F&B is retail’s current plat du jour, the global and retail leisure landscape as a whole is undergoing widespread structural change – for better and for worse. Macro-demographic trends, advancements in technology and changing consumer expectations and shopping habits are all playing their part. The most influential trend, in relation to F&B, is the emergence of the ‘experience economy’, driven by millennials’ insatiable appetite for experience, often at the expense of ‘stuff’. This is now touching all age brackets who are realising that experiences often increase happiness and are equally as valuable as buying ‘things’.
F&B is certainly fast evolving and over recent years, growth in F&B has outstripped growth in retail in many countries. In the United States and UK, sales at restaurants and bars overtook spending at grocery stores for the first time recently. The swing in continental Europe is not so pronounced as yet, but it is certainly moving in the same direction.
These trends and changing consumer spending patterns are changing the physical shape and function of the world’s retail places. Total space in schemes dedicated to F&B as part of this has grown from 5% a decade ago to 10-15% in some European markets, and 8% in the US today. We expect to see this reach 20% of total space by 2025 as consumer spending continues to target F&B. New destination schemes typically have 20-25% allocated to food in these markets, with extreme cases in Asia exceeding 40%.
What are the main benefits of more food?
The obvious direct benefit of foodservice operators to shopping centres is sales through the tills, and additional rent paid to landlords. Foodservice has also helped many schemes reduce vacancy rates, by tapping into an acquisitive and growing sector, offsetting any slowing in demand from other sectors (fashion in particular) as a result of online.
There are also myriad indirect benefits to landlords from having a strong and relevant foodservice offer, including increased footfall, longer dwell times, higher spend and overall scheme sales growth that can all result from a well-executed food offering. Often referred to as the ‘halo effect’ of foodservice, these benefits stem from the fact that adding foodservice helps shopping centres incorporate the ‘Diversity and Vitality’ that the physical space needs to remain resilient and future-proofed, as explored in JLL’s Redefining Retail Places initiative. Foodservice generates excitement and experience and ultimately enables retail places to meet and exceed customer expectations. Good foodservice ‘captures and captivates’ customers, wins hearts and minds and connects on an emotional level.
Does more food = opportunity or risk?
People are also now more interested in experiential rather than transactional, functional food offers – therefore simply providing more restaurants and bars does not necessarily guarantee a successful F&B offer. It does mean, however, that there is real opportunity in this part of the market, if the offer is strategically planned and executed.
With opportunity comes risk, however. F&B is a dynamic and fast-moving sector, and this huge expansion in allocated space for food is unlikely to last forever. The retail industry is evolving from all angles, and requires the right mix of guidance and expertise to successfully identify opportunities, navigate challenges and risks, and position for change as this segment rapidly grows up. As we go on to explore in the second of this series of blogs, as Foodservice matures, it also becomes an ever-more complicated business.
Explore the ICSC ‘Successful Integration of F&B within retail real estate’ report with JLL in a series of blog posts this Autumn. Subscribe at blog.jll.eu/retail
- James Brown – Head of EMEA Retail Research
- Colin Burnet – Director, EMEA Retail Research