How COVID-19 is shaping the South Florida dining industry and restaurant spaces
In late 2019, Globe Street reported that in South Florida, “restaurant spending now accounts for approximately 25% of all retail spending,” and that “Food-and-beverage has proven to be resilient to market conditions. Landlords are diversifying their assets with experience-driven retail, largely food and beverage tenants, in hopes of driving foot traffic and attracting other retailers in South Florida.”
Of course, that bullish outlook was recorded just months before COVID-19 hit the nation. According to the South Florida Business Journal, “by June 1, the reported revenue for restaurants in Broward and Palm Beach counties revealed a 40% decline from the previous year, while Miami-Dade restaurants showed about a 60% decline in sales.”
As one of Miami’s leading commercial real estate companies, Metro 1 has witnessed firsthand the freezing effect that COVID-19 has had on the food and beverage industry in our state, and how that has rippled into the commercial real estate market as a whole. Many deals that were seemingly set in stone involving new restaurant concepts became dead in the water by the end of March. While hot deals cooled, investors also pulled back funds, putting remodels on hold, and all the while, existing concepts struggled to survive. Many restaurants — even those helmed by celebrity chefs in Miami’s hottest hotels and neighborhoods — shuttered their doors.
In a recent article from QRS Magazine reported that “75 percent of (restaurant)operators said it’s unlikely their restaurants would be profitable within the next six months.” The same article also estimates that the industry has lost more than $120B on a national scale.
Now that reopening has begun and it seems we have made it over the hump in terms of restaurant closures, the market is starting to bounce back. We are a little over a week into restaurants being able to reopen indoor dining at 50% capacity. The new county-wide lifts on regulations come as positive case rates and hospitalizations have been on the decline, and while masks are still required at restaurants while not eating, parties are limited to tables of six or fewer, and buffets and other self-serve areas remained closed, going out to eat is starting to feel much more “normal” than it has in some time.
Here’s how we expect the food and beverage sector of Miami’s commercial real estate market to continue to respond over the next few months:
A Clean Slate for New Concepts and Expansions
First of all, we’re seeing a wide-open playing field of opportunity, unlike anything we have seen in the past several years. Take Wynwood for example — one of Miami’s most expensive, and exclusive, places to test a new dining concept. Commercial restaurant space, especially second-generation, is hard to come by, and so are liquor licenses. Now, there are multiple second-generation restaurants vacant and ready to be taken over and reimagined in the artsy neighborhood. If you’re an investor or restauranteur who has been sitting on a concept and played your cards right, the post-COVID market could be the perfect time for you to pounce.
Increased Deal Flow
Secondly, we can expect a large spike in food and beverage deal flow going into Q4 of this year and Q1 of 2021. If economic recovery remains strong and COVID case numbers continue declining, dining may return to a “true normal” with restaurants serving guests at full capacity again by the end of the year. If this is the case, the many deals, leases, sales, and remodels that have been on ice may spring back into gear, accelerating deal volume around the turn of the year.
Reimagined Spaces
Third and last, with restaurants looking for a whole new way of doing business — they will be looking for a whole new kind of space to do it in. Properties that were once considered “prime” may be eschewed in place of properties with outdoor dining and more to-go and delivery adaptive potential. We’ve said it before and we’ll say it again: outdoor space will come at an all-time premium, with owners wanting to hedge their bets and cater to consumer comfort levels by providing space for patrons to dine “en Plein air.”
In addition, all sorts of features are making their way onto re-adaptive and new-construction blueprints that would have seemed preposterous pre-pandemic.
Take Burger King for example: the restaurant chain giant is planning significant updates to future locations, including doubling or even tripling drive-thru lanes to accommodate take-out demand, walk-up windows with plexiglass dividers, QR-code enabled app-ordering with curbside delivery straight to your car, and even Burger King “pick up lockers” outside the restaurants that will keep your food warm until you arrive, facilitating a truly contactless pickup experience.
Other restaurants are exploring the concept of “ghost kitchens” — skeleton workspaces where chefs can prepare food in an economical way exclusively for pickup and delivery.
Besides these new innovations, food and beverage entrepreneurs are looking for spaces with no shared HVAC, spaces with walk-up windows, ample parking without the need for valet, and spacious interiors allowing for socially-distant dining.
It may be a while before we see Miami’s restaurants return to pre-COVID levels of activity. But if we know one thing — it’s that our city loves to eat. Even amidst the many closings and shutdowns, there have been pop-ups and bright spots, such as Old Greg’s Pizza, a pop-up in the Brad Kilgore-run kitchen of Kaido, Chef Niven Patel’s newest endeavor, the tropical-inspired Mamey at the Thesis Hotel in Coral Gables, El Bagel in MiMo, and a slew of other tasty havens. And we are confident that the Miami real estate market will come back hungrier than ever for spaces in which to create the next Instagram darling restaurant, romantic date night spot, or family vacation outing.
