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The On-Demand Food Economy
In the era of Seamless there are investors making bets on delivery-only restaurant kitchens in warehouses near city centers. CloudKitchens, a startup founded by Travis Kalanick, has acquired at least 10 properties in several major cities since 2017 in pursuit of this venture with Goldman Sachs as a backer (The Real Deal).
Similarly there's an increase in demand for cold storage to facilitate the delivery of groceries. Blackstone Group is paying $18.7 billion for a network of warehouses to accommodate this expanding consumer niche. The spending online for groceries is expected to grow over the coming years. Currently just 3% of U.S. grocery spending occurs online, while 20% of footwear and 40% of electronics spending occurs online (LA Times).
Consumer preference points to the more efficient and affordable and the trades above reinforce my opinion that location has less importance than it once did. When groceries can be delivered at a cheaper cost because they're not stored in a retail location it allows for increased growth further away from the city center.
This informs other parts of the real estate market. For some of my condominium and cooperative buyers in New York City I often hear the seller's agent pridefully declare how the retail rents buttress lower common charges. But buyer beware! The bets above seem to point to a retail climate whose prospects continue to dim relative to where it once was.
Best,
Corey
646.939.7375