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High Demand For Drive-Thrus Making It Difficult For Tenants To Find Suitable Space

May 6, 2021

 

Drive-thrus were the life raft that kept many fast-casual and quick-service restaurant chains afloat during the most difficult days of the coronavirus pandemic.

As major brands continue to come up with new and inventive ways to expand and improve their drive-thru offerings, more traditional dine-in restaurants are also pivoting to incorporate drive-thru accessibility into their models, according to retail experts.

NewQuest Properties Vice President Austin Alvis said that drive-thrus have become an absolute requirement for new store growth. The industry has recognized that the drive-thru is not just a driver of revenue, but also a protective mechanism in times when things go wrong.

“Everybody operated almost an entire year with no dine-in business, so it really changed the game,” Alvis said.

Drive-thrus have been popular for several decades, fueled by America’s car-centric culture and increasingly busy lifestyles. But the coronavirus pandemic pushed that popularity to new heights, as health fears forced restaurant dining rooms to close for extended periods.

The second quarter of 2020 was arguably the toughest for retail and restaurant businesses, thanks to widespread lockdowns and mandatory closures. Total eating and drinking place sales were $176.7B in Q1 2020, but plummeted to $119.5B in Q2, according to the National Restaurant Association. At the same time, drive-thru business soared: In the U.S., traffic rose by 26% during Q2 2020 and represented 42% of all restaurant visits in the U.S., according to The NPD Group. 

In July, when more restaurants reopened at limited capacity and overall retail sales rose — back up to $162.3B for Q3 — figures showed that drive-thru visits still increased by 13%, the highest visit increase among the service modes of on-premises, carry-out and delivery.

Chipotle began to roll out drive-thru lanes in 2018 as part of a broader push into digital ordering. The firm has now made drive-thru lanes a priority: about 70% of all new stores will have drive-thru service in 2021. Other restaurants like Shake Shack, Panera Bread, 7-Eleven and Pizza Hut have also announced plans over the past year to adopt drive-thru for the first time or to expand their offerings.

SeeLevel HX CEO Lisa van Kesteren said she believes an evolution is coming where more restaurants will be embracing the drive-thru model. Her market research firm releases an annual report that ranks the drive-thru performance of restaurant chains across the country.

“These restaurants that aren't traditionally fast foods necessarily are now having to come up with these different ways to compete, because they don't have dine-in,” van Kesteren said. 

For more traditional dine-in restaurants looking to do drive-thru, it isn’t about competing directly for quick-service restaurant business, but rather, competing on the grounds of easy accessibility. 

Fidelis  Leasing Director Matt Brock said that since the onset of the pandemic, he has been getting plenty of calls from traditional sit-down restaurants, telling him that their delivery and to-go businesses have gone through the roof. Many are looking at drive-thru options, though high demand is making it difficult for tenants to find a suitable space.

“I think everybody is looking for an option right now. A lot of people are finding that that's kind of a unicorn, to find a 1.8K SF, 1.6K SF drive-thru. There's just not a lot of options out there,” Brock said.

Brock received a call earlier this year from a tenant in one of the outparcel buildings at Fidelis’ Westplace Marketplace in Summerwood, situated in northeast Houston. The tenant’s drive-thru traffic volumes were so high that they wanted to lease another space in the building to install a second kitchen just for drive-thru and takeout orders.

“That kind of order was taking up so much traffic in their parking lot that they wanted to find another location within the shopping center to be able to service those types of calls,” Brock said.

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