Bonside Sees Multi-Unit Retail Demand as Fund Closes

Not every retailer has the flexibility of a giant like McDonald’s to open up thousands of locations across the country. However, more including mom-and-pop shops are opting to open more locations rather than just one, says Bonside founder Neha Govindraj.

Known as multi-unit retail, the annual revenue combined in the U.S. is estimated to be $200 billion, according to FRANdata.

WANING DEMAND FOR SINGLE SHOPS

“You’re less often seeing folks opening single locations, but instead seeing the rise of these multi-unit expansion plans, Govindraj told GlobeSt.

“We’re seeing a lot more creativity in terms of how folks are approaching on the commercial real estate side, assembling tenancies in new developments.”

Some of those considerations when designing the development include how many and what kind of food and beverage makers will be in the area.

A big reason for this trend is consumer demand. For example, some when visiting a friend or family that lives a distance away may enjoy a highly-rated sandwich shop that’s unique in its own way. However, that store might be too far from their homes to visit regularly. If there’s enough demand, it makes sense to open at least another location in the right area to satisfy convenience and consumer needs.  In that case, “it’s a no-brainer to go open a second sandwich shop,” Govindraj said.

Particularly, Govindraj sees demand for business that want to open up four or five stores.

BONSIDE AVOIDING SLOWDOWN WITH BUSINESS APPROACH

The demand comes as Bonside, which provides capital to the brick-and-mortar sector, recently announced the initial closing of its flagship fund, which has raised $15 million. Not only does it strengthen capital – but it allows it to make monthly payouts to investors, according to the company.

Led by the retail REIT Kimco, the fund is structured as an Repeatable Revenue Agreement, where investors pay into the company and receive monthly payouts until a fixed return is satisfied. When using this approach that provides developers with non-dilutive capital, Govindraj noted the firm has been independent to the slow down some other traditional commercial real estate lenders have been faced with in the high interest rate environment.

“We’re still seeing businesses that want to scale their footprint, and so we will be there to provide capital to them,” Govindraj said.

NYC LEADING DEMAND

When it comes to CRE in general, Bonside is seeing increased demand in big metro markets including New York City (where the firm is based), and Los Angeles. Also, Govindraj added that developments are emerging in more “second-tier cities” like Nashville and Atlanta.

“There’s deal-making happening there,” she said of the latter two markets.

“And wherever you see deal-making happening, there’s an increased need for capital because someone has to finance those build-outs.

Multi-unit retail will be something Bonside continues to keep an eye on, as it has an upbeat outlook on the industry. Govindraj noted that CRE operators see less risk in signing a lease at a fourth location of a brand that they have seen do well versus a single store with a new concept.

“We just think that every business is going to be a multi-unit business at some point, and so that’s really where we focus,” Govindraj said.