Dine-In Restaurants Gaining on Pre-Pandemic Numbers

Good food plus good ambience appears to add up to good business for full-service restaurants now that the fear of Covid has diminished. In a few cities, reservation levels are even above 2019 levels. Miami led the way with a 50% increase. And landlords are paying attention.

JLL’s  F&B Report 2023 paints a generally optimistic portrait of both fast food and dine-in restaurants. Consumers were already buying burgers and chicken wings and subs at pre-pandemic levels by February 2023. Dine-in business was still 6.8% below February 2019, but up 6.2% compared to February 2022. Now the main challenges both sectors face are rising food costs, a dwindling labor supply, and a shortage of available space. 

Total food and beverage sales rose 34% in 2021 and a further 17% in 2022. JLL cites a Bank of America report showing 70% of restaurant owners surveyed expect another boost this year, and 52% plan to expand. One change resulting from Covid is growing demand for delivery or drive-through service.

Good news for eateries is also good news for retail-property owners. “With retail construction at a minimum and demand at a high, availability of single-tenant retail space is at a historical low of approximately 2.4%,” JLL stated. “Availability is even lower for small freestanding spaces (under 3,000 square feet)” which are the preferred target of fast food and coffee shops that have seen “incredible growth” post-Covid. 

The statistics on reservations at restaurants are not clear, though they appear to be on a generally upward trend. JLL quoted data from the restaurant booking app Open Table that finds “the number of bookings has now fully returned to pre-pandemic levels,” rising 3.3% from January 2019 to 2023. At the same time, JLL stated, “Seated diner recovery varies widely across major U.S. markets, with most market reservation levels still not back to pre-pandemic numbers.” 

Restaurants in Miami are clearly outperforming the nation, followed by Austin (up 23%), Phoenix (up 12.6%) and Houston (up 9.3%), according to Open Table data cited.

However, restaurants in other major cities are still off pre-pandemic levels. In San Francisco the number of seated diners was down 45% in January 2023 compared to January 2019, 30% in New York, 27% in Washington, DC, and Seattle, and 10% in Los Angeles.

Meanwhile, quality restaurants are being actively courted by property owners. “In markets where dining out is hot, landlords are offering heavy incentives to exceptional restaurants viewed as a placemaking investment,” JLL stated. In Miami, tenant improvement allowances could be up to $100 to $200 per square foot, the report notes. A few months of free rent or percentage rent is also being dangled before some prospects.

The fly in the soup for restaurateurs is rising costs. “With food and labor making up two-thirds of every sales dollar, restaurants are being hit with a one-two punch,” the report states, quoting the National Restaurant Association. To soften the impact, some restaurants are changing menu options, downsizing servings, cutting hours, or automating as much as possible. 

Other owners are focusing on “eatertainment” – an experience that blends casual menus with fun activities like mini-golf, pickleball and arcade games. For the very wealthy, there are private dining clubs or “clubstaurants” open to members who pay an annual fee. 

For the rest of us, more and more food halls beckon, offering multiple food choices at reasonable prices.