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The F&B sector has changed significantly in recent years, not only in terms of the size of the market, but also in the variety and quality of the offering. As rents continue to rise in Europe, space previously dominated by fashion retailers is now being occupied by trendy gastronomic restaurants. People have evolved from collecting “things” to collecting “experiences”, and shopping centers have adapted to this change by improving and expanding their gastronomic offerings. Food and beverage (F&B) will play an even more crucial role in the success of retail real estate.

There are several reasons for the growing importance of F&B.First of all, it boosts footfall. By offering a variety of dining options, malls can cater to a diverse range of customers and keep them engaged for longer periods. F&B also increases dwell time. When people visit malls, they spend hours browsing through different stores. Furthermore, F&B enhances the shopping experience: Dining options provide customers with a break from shopping and add to the overall shopping experience. Ultimately, F&B is as essential as retail in a mixed-use environment. Nevertheless, F&B must contend with major challenges – just like classical retail.

Concepts that combine international food trends with regional elements are on the rise. This “new wave” of enhanced food courts was developed by Sonae Sierra at Cascais Kitchen, where international fast-food players in the food court trade alongside local and regional tenants in the integrated Hala Hutnik space

In the past, F&B at shopping centers was more of a retail accessory that was true to the motto: People have to eat. In the last decade, the importance and role of food service has grown significantly. This change is largely driven by the need for shopping centers to offer more than mere shopping facilities in the face of e-commerce and has only been reinforced by the coronavirus pandemic. In recent years, a large number of stores have had to close, including entire shopping centers. Tens of thousands of square meters of prime retail space was left vacant. Suddenly, there was a realization that retail would not fill the vacant spaces, so the importance of F&B and leisure was amplified.

INGKA Centres Saluhall Food Hall – a new global F&B concept: Saluhall will be Ingka Centres’ first food hall concept that will not sell beef. The menu will be 80 percent plant-based at launch with the ambition to evolve to 100 percent, and zero waste to landfill and zero single-plastic usage. Through lectures, cooking experiences and a cookery school, Saluhall will be a natural location that brings people and local businesses together.

F&B Placemaking and Environment

F&B was already being delivered in a well-executed manner at some centers around Europe prior to the pandemic, but that was typically restricted to large, regional assets where the dwell time was three or more hours, states Ian Hanlon, Director of Coverpoint Foodservice Consulting. Every landlord and asset manager needed a compelling F&B offer, relevant to the respective catchment and demographic, that could retain and attract footfall. The function of F&B was growing and changing to one that could provide a critical differentiator from the competition. The same brand fascia from center to center would no longer cut it as guests were looking for experiences when dining out, especially after years of lock down. F&B placemaking and environment were moving to the top of the agendas of asset managers, which was a huge move away from the functionality of the past.

Whataburger, the fifth-largest burger chain in the US, opened its first all-digital restaurant, following in the footsteps of Chipotle and Panera.

The way landlords approach the topic of gastronomy has changed tremendously. Some of the former large department store spaces have been re-energized by the introduction of new leisure offers, particularly in the competitive socializing and experience-making sectors. Shopping centers have completely revamped their F&B concepts to include significantly more food and beverage space.

Let’s not forget food halls, which are making all the headlines in redeveloped retail environments, such as Manifesto Market at Brookfield’s Potsdamer Platz, The Playce, and Arcade at Battersea Power Station. “In these instances, F&B has become one of the key anchors of the developments, driving footfall and creating a halo effect on the adjacent retail and leisure offers,” states Hanlon. The function of F&B is a world away from where it was a decade ago, and it illustrates the critical importance of getting the quantity of space, the location, the tenant mix, rental levels, and the concept correct for individual assets.

Understanding F&B Operators

Not only has the role of F&B changed, but so has the relationship between center management and food service operators. Dialogue and cooperation between F&B tenants and center management has never been more important. At a time when the hospitality industry is still recovering from the pandemic, the dynamics of doing business have changed, and center management needs to understand that. In the past, management focused on retail, particularly key anchor tenants and fashion. Food service was viewed as a functional add-on offering, with little variation across centers. While asset managers had tremendous knowledge of retail tenants and their business models, food service operators did not. Landlords and center managers have had to learn that there is a big difference between the business models of retailers and food service operators, and, therefore, the challenge for center management is still understanding how their support for food service tenants differs. Cooperation and agreement on key elements such as CAPEX requirements, rent levels and mechanisms, turnover thresholds, shorter lease terms and flexibility, and day-to-day operations are critical to enabling food service tenants to operate successfully and profitably. Food service is complex compared to retail – it uses more energy, produces more waste, is noisier, more staff-intensive, more difficult to forecast, and, in some cases, involves the management of common areas – but, when delivered collaboratively, can make all the difference over the competition. “Groups like ECE, British Land, and Echo Investment now have teams dedicated to F&B, newly created roles overseen by people who have experience in the hospitality industry and can speak and understand the language of food service tenants,” says Hanlon.

Following F&B Trends

The driver of all change is the consumer. More than ever, people are looking for an experience that combines price, quality, origin, innovation, and personalization. They also expect connected experiences in which the physical and the digital coexist in the same customer journey. That is precisely the point at which great opportunities for the retail real estate industry lie. Without a doubt, there are certain trends that the industry needs to follow.

Arcade Food Hall & Bar at Battersea Power Station: The nearly 7,300-square-meter space offers a modern approach to dining and houses a 500-cover food hall, two bars, three restaurants, and a private dining room – all set in the buzzing atmosphere of the Power Station.

One of the biggest trends is the move towards healthier and more sustainable food. Some companies like INGKA have made this their brand essence. With their Saluhall Food Hall concept, they focus on plant-based meals served in a sustainability-oriented environment. Other trends include combining local offerings with international one, creating environments that are suitable for social media, which creates a completely new value for customers and, last but not least, integrating digital elements into ordering options.

Example of the value of intangibles: Consumers seek “instagrammable” moments at EL&N Café.

The integration of digital elements, in particular, is a controversial topic. Consumers and operators are currently experiencing opportunities that are causing congestion. Is a robot in service, for example, an experience that only excites in the short term, or can it really relieve employees in the long term, especially during times of labor shortage? In which concepts does service gain as a result? In which concepts does service lose out? Which consumer groups have accepted this technology? The same applies for artificial intelligence (AI). While fast food chains were early adopters of AI, it has since become more prevalent and more important throughout the entire industry. The benefits can extend to all stakeholders in hospitality businesses, as AI helps to improve margins, increase profits, and even discover new revenue streams. Harnessing the power of data and connectivity might be essential, especially at a time in which labor and produce costs are more expensive.

ACROSS 4|2023 F&B

Learn more about how the industry is moving forward in our ACROSS magazine on F&B


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