The fast-casual restaurant boom continues across the Midwest

September 19, 2016

Erin Patton has seen the same trend that retail experts across the Midwest have witnessed: Fast-casual restaurants are hot, and the demand for them in cities throughout the region is only increasing.

Erin Patton has seen the same trend that retail experts across the Midwest have witnessed: Fast-casual restaurants are hot, and the demand for them in cities throughout the region is only increasing.

Patton, vice president of investments and senior director with the national retail group of Marcus & Millichap, has seen plenty of new fast-casual restaurants open their doors in Cleveland and Columbus, the markets that she most closely serves.

Patton says that fast-casual Mexican food, pizza places and burger spots seem to be especially strong in these Ohio markets.

“The fast-casual restaurants are truly one of the strongest drivers in the retail market here,” Patton said.

Columbus and Cleveland aren’t alone, of course.

Euromonitor reported that the fast-casual market has grown by 550 percent since 1999, with consumers spending an estimated $21 billion in this segment since 2014. A report released earlier in 2016 by Technomic identified such fast-casual chains as Blaze Pizza, MOD Pizza, Panera Bread, Freshii and Sweetgreen as players who are seeing strong sales growth today.

Patton said that fast-casual restaurants are performing well because consumers today want to spend less money than they would at a traditional sit-down restaurant but also eat healthier and tastier food than they would get at a chain such as McDonald’s.

“It has been a steady evolution,” Patton said. “Providing an experience is becoming very important for consumers. That is what they are going out of their house to do. They don’t want to just pop into a shop or pop into a restaurant. Instead, they want to have an experience. That is driving the push for more fast-casual choices here.”

The fast-casual market is bringing changes, too, to more traditional fast-food offerings. Burger restaurants, for instance, are getting a fast-casual makeover today, with speciality burger chains eating away at the business of traditional fast-food burger providers.

The same is happening at pizza chains, with Patton saying that make-your-own pizza concepts have steadily grown in popularity in both the Cleveland and Columbus markets.

“It’s all about having a new take on a traditional idea,” Patton said. “We are seeing these concepts usually appear in mixed-use developments. In these developments, it is about providing experience.”

Other trends

The rise in fast-casual dining isn’t the only trend that retail pros are seeing. Patton said that much of the expansion in the retail sector today is coming from necessity-based retailers. This includes retailers such as grocery stores, restaurants and gyms, ones that offer products or services that consumers can’t get as easily online.

“These are things that shoppers need on a regular basis, like food,” Patton said. “They are retailers that aren’t as impacted by the Internet as some others have been.”

Patton said that the retail market across the Midwest remains strong in general. And in Cleveland and Columbus in particular? The sector continues to see increased sales and leasing activity.

“Both of these areas have rebounded nicely after the recession,” Patton said. “The vacancy rates in retail in Cleveland and Columbus were quite high after the recession. Over the last three years, the vacancies that were going to fill up in this sector have already done so. If there is a long-standing retail vacancy at this point, there is likely a reason for it. Demand has filled the other vacancies over time.”

Even as the retail sector continues to strengthen, it does face challenges, most notably from the Internet.

Patton said that those retailers who are most successful today are discovering ways to not compete with online shopping but to adapt to it.

“It used to be, how can we beat the Internet?” Patton said. “Now, there is a broad-based acceptance from retailers that they have to work alongside the Internet. They have to co-exist with the online world. Many traditional retailers are embracing e-commerce. At the same time, Amazon announced that it is opening something like 100 small-shop spaces. There is a balance there. I think in most cases, brick-and-mortar and online can co-exist. This is the future. Convenience is what is most important to shoppers.”

Patton said that every retailer is meeting this challenge in a different way. She pointed to department store J.C. Penney. Today, this long-time retailer is heavily promoting and focusing on items such as furniture, household goods and makeup. These are items that consumers want to go out and shop for. They are less likely to purchase these items online.

“That’s a great example of how someone is embracing the current environment and working around it,” Patton said. “They are modifying what they sell. They are modifying their approach to meet the ways in which consumers shop today.”


Article Published on by Dan Rafter

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