Ghost kitchens and Uber Eats impact property
Food delivery services like Uber Eats will affect the food and beverage property sector. Photo / Supplied
Use of food delivery apps like Uber Eats by General X ‘millennials’ will have a major effect on the commercial property decisions of many food and beverage operators, says Chris Beasleigh, head of retail for Bayleys.
“Until recently, restaurants had a fool-proof safeguard against the internet – patrons physically needed to visit their premises to enjoy their cuisine,” Beasleigh says.
However, the online food-delivery business is tipped to reach $74 billion worldwide by 2020 and this is bringing major changes to the hospitality sector – impacting on the commercial property market as a result.
“Millennials want to be able to enjoy their favourite restaurant dishes at home and are by far the largest users of food delivery apps,” says Beasleigh.
He says food delivery services run through smart phone apps have the potential to heavily influence the commercial property decisions of many businesses in the food and beverage sector.
“Apps allow consumers to order food with ease for home delivery from restaurants that were previously without a traditional take-away service. As they grow in popularity, the property requirements of food and beverage providers will begin to change, in terms of location and capacity for pick-up services,” he says.
“Restaurants will increasingly need to factor in food delivery services when making leasing decisions. For example, properties that have good street frontage to attract customers and can accommodate parking for delivery bikes and cars will be in demand.”
Food delivery apps will also increase development options for secondary space close to major arterial routes as digitally-savvy operators look to set up ‘ghost restaurants’ – establishments not having tables and chairs for in-house dining, but basically comprising kitchens that service delivery customers.
“Domino’s Pizza has already shown that space has become less important to certain food and beverage businesses,” Beasleigh says.
“Ghost restaurants allow operators to run a viable business with a minimal footprint. A kitchen-only operation doesn’t need to devote square metres to customer seating and waiting areas, further reducing operating costs.
“Restaurants or individual chefs could decide to skip the storefront and set up their kitchens in more affordable properties in areas close to their target markets.”
On the other hand, ghost restaurants might have the effect of increasing demand for commercial kitchen space in desirable locations.
“Food delivery operators could risk losing out on a growing revenue stream if the location of their business is not within 30 minutes’ drive of their target market or in areas not covered by delivery services such as Uber Eats,” Beasleigh says.
“This could lead to a clustering of food and beverage businesses in high-custom locations that offer easy access to motorways and major arterial routes.
“Partnering with food delivery companies is a way for restaurant businesses to diversify their revenue streams, and, ultimately, make more money, which is better for landlords and investors.”
However, Beasleigh says Uber Eats and services like it are unlikely to change the requirements of restaurants at the top end of the market whose property needs will probably remain unchanged with high-profile locations still having the power to creates awareness and stimulate walk-in custom.
Beasleigh says recent data shows that New Zealanders are devoting a bigger share of their food spend on eating out and this is most pronounced among millennials. The under-30s are the biggest spenders on food, allocating around 20 per cent of their budget to eating out.
He says Uber Eats is one of the biggest players in the market globally with its service being available in more than 120 cities worldwide.
Uber launched the service in New Zealand in March 2017, delivering food from around 70 restaurants to customers within the Auckland CBD and central Auckland suburbs. It has since expanded the service to Wellington, Christchurch and Hamilton, with the number of restaurants in New Zealand providing food through the app numbering almost 700.
“In Auckland alone, Uber Eats offers more than 24,000 menu items delivering 20 hours of the day from more than 400 eateries and covering an area of 934 square kilometres.”
Customers place an order on the app for delivery within 30 minutes and they can track progress as the food is prepared and delivered.
Chris Beasleigh, head of retail for Bayleys