'Eatertainment' A Cornerstone of the New Retail

Seferian: “The trend toward nimbler, smaller spaces will continue, with increases in food-hall venues and multiple users in the same building.”

NEWPORT BEACH, CA— Restaurants are a large part of today’s open-air centers and continue to be heralded and highly recognized as big consumer draws, CBRE ‘s recently appointed first VP Mark Seferian tells GlobeSt.com. Seferian recently joined the company’s national restaurant practice; he was previously real estate director for one of the world’s largest casual-dining companies, Bloomin’ Brands Inc. , where he oversaw all real estate development activity in the Western US for core brands such as Outback Steakhouse, Bonefish Grill, Carrabba’s Italian Grill and Fleming’s Prime Steakhouse & Wine Bar . We spoke exclusively with Seferian about the casual-dining trend and where he sees it heading. GlobeSt.com: How did the casual-dining craze evolve to the point where it is now? Seferian: Casual dining has evolved from a clear-cut category of full-service, casual-dining, sit-down restaurants to a much broader and more-competitive niche now crossing over what were previously segregated dining segments. Instead of going to Olive Garden, Chili’s or CPK , consumers may instead choose to go to Chipotle, Blaze Pizza, Lemonade or Tender Greens . The casual-dining category now includes and competes for dining dollars with quick-service restaurants and some fast-casual restaurants. The blurring of these historical barriers can be attributed to various factors. Several factors influencing this consumer trend toward higher usage of time-sensitive service venues include the ability of QSRs and FCRs to offer higher-quality food, more menu choices and quicker service at an affordable price than what was previously available. There is also an increasing trend among QSRs offering alcoholic beverages, which further contributes to a consumer shift away from full-service restaurants. Another contributing factor to the casual-dining evolution is that dining out has become a leisure time activity for today’s time constrained Baby Boomers , Millennials and Gen X-ers . The QSR is an enjoyable and time-saving option contributing to a lifestyle choice, the choice to dine out more frequently and save time spent on lengthy meal preparation and clean-up at home. These factors increase consumer propensity to dine out, as evidenced by the proliferation of these smaller-format quick-service restaurant formats appearing across multiple food categories. GlobeSt.com: How does casual dining fit in with everything else going on in the retail real estate realm? Seferian: Current trends in casual dining fit today’s changing real estate environment where there are fewer traditional spaces available to more restaurants tenants than ever before. Today, many real estate assets are being repositioned , such as older, underperforming, enclosed regional malls that are being converted to open-air centers , some entertainment oriented and others more value oriented. Restaurants are a large part of these developments and continue to be heralded and highly recognized as big consumer draws, frequently referred to as “eatertainment.” Among these opportunities are existing restaurants, conversions or tear-downs of mall TBAs and portions of larger department-store spaces. This trend of repositioning properties and reuse of buildings will continue even when there is an upward trend in new real estate development. GlobeSt.com: Where do you see the casual-dining trend leading? Seferian: Current thinking by some restaurants in the broadened casual-dining segment now includes downsizing buildings to a smaller footprint, doing dual brands in a single building, considering urban location and growing in overseas markets, which adds the complexity of foreign economies and currency fluctuations related to the dollar. The trend toward nimbler, smaller spaces will continue, with increases in food-hall venues and multiple users in the same building. Industry-leading companies will need to be more flexible in evaluation of site opportunities to meet the changing landscape of the industry. Today’s restaurant guest is an aware, food-smart diner with expectations of a high-quality “dining experience.” This is often referred to as “ experiential dining ,” meaning a positive experience from “curb to table,” where the design and ambiance is critical to the guest experience and may be as important as the food quality and value. GlobeSt.com: What else should our readers know about the casual-dining trend as it relates to real estate? Seferian: Look for consolidation in crowded food categories such as pizza and burgers. Once this occurs, it will loosen demand to some degree and make more space available for reuse by new and innovative restaurants. This loosening of demand will alleviate some of the pressure on companies that, due to the lack of available space, are challenged to achieve sales and unit-level growth as required by both private-equity investors and Wall Street. Another interesting restaurant real estate trend is that of investment sales of casual-dining restaurant properties. Properties with large-chain tenants having stronger balance sheets are attracting heavy investment at historically low cap rates. Cash obtained from sales to investors ( 1031 or otherwise) or REIT conversion provides much-needed capital frequently used to buy down debt or alternatively may provide necessary funds for remodeling of older units.