QSRs Projected to Grow 10% Through 2029
Quick service restaurants are showing relative steady investment volume and cap rates.
A report from Avison Young gave a status update on quick service restaurants and how they have been holding up under CRE strain. Which has been pretty well, given circumstances.
The U.S. market has a current count of 195,507 QSR locations and is valued at a current $406.7 billion. The firm projects a 10.28% expected growth from now through 2029. “These expectations reflect the resilience of the QSR industry, particularly in the net lease sector, as it continues to adapt to the constantly evolving landscape,” they wrote. Yum! Brands is the company with the leading market share of 6.47%.
Average 12-month trailing cap rate was 5.44%. That is 64 basis points below the 6.08% average for all single-tenant net lease. Starbucks had an average cap rate of 5.32%; Dutch Bros. was 5.06%; 4.70% for Chipotle; and Taco Bell with 5.56%. “Notably, cap rates for this sector have not increased at the pace that interest rates have for this past year,” the firm wrote. “Factors that cause this are the high and consistent demand for QSRs and a lag in the real estate market for repricing these assets.”
As of April 25, 2024, there were 943 active QSR listings for sale, with an average asking price of $2,526,700, an asking cap rate of 5.62%, and 13.86 years average term remaining.
On a global basis, the top 10 QSR chains claim enough visitors to populate more than most entire countries: McDonald’s, 3.3 billion; Chick-fil-A, 696 million; Taco Bell, 671 million; Wendy’s, 666 million; Burger King, 626 million; Sonic Drive In, 404 million; Subway, 317 million; Jack in the Box, 239 million; Dairy Queen Restaurant, 233 million; and Arby’s, 229 million. (The quoted data source was Placer.ai, but it’s unclear the timeframe or number of countries it’s taken over.)
“Regional cap rates mirror historical trends, which are skewed by Florida and California assets trading at a premium,” they wrote. “Tax free states like Texas and Nevada are also drivers of lower regional cap rates.” Northeast was 5.20%; Mid Atlantic, 5.95%; Southeast, 5.49%; Midwest, 5.78%; Southwest, 5.38%; and West, 4.89%.