The Progressive Real Estate Partners team recently returned from a very productive ICSC Western Region conference in Palm Springs. Normally, I’d write a blog recapping the event but there really weren’t any major takeaways that differed from what I shared after the Las Vegas ICSC conference AND maybe that’s the real takeaway. If you missed that blog you can read it here: Brad’s Blog – What I Learned at the 2025 ICSC Las Vegas Conference.
Instead, I decided to write about a topic that I have thought about a lot over the last few years, which is the restaurant and grocery industries.
Let’s start with the premise that you have an unlimited amount of money. If this is the case, there really is almost no limit to the amount of clothing, furniture, hardware, décor, etc. that you can purchase.
BUT the reality is that there is only so much food you can eat. You might be able to eat at exclusive restaurants, purchase finer ingredients, or consume more unique beverages. But, at the end of the day, there is only so much you can eat and drink.
If you accept this premise, then the food sales industry, whether in the form of groceries or restaurants, really is a finite industry where for every winner there is a loser. The only situation when perhaps this is not the case is when the population of a particular trade area is expanding. But most trade areas aren’t expanding significantly and therefore the food industry really is a zero-sum game.
According to the USDA Economic Research Service, “Food Away from Home” exceeds “Food at Home” by a margin of about 59% to 41%. This translates to approximately $1.5 trillion dollars of sales “away from home”!! This divide was close to even during the heart of the pandemic, but the gap between “away from home” versus “at home” has exploded since 2021.
Based upon the battle between “away from home” and “at home” as well as the ongoing battles within the grocery and restaurant industries, I am sharing the following to offer some food for thought and spur a dialogue about how this zero sum game affects the retail industry.
How Grocery Stores Are Fighting Back: There was a time when if you wanted to cook at home, you went to the grocery store and if you wanted to eat out, you went to a restaurant. I suggest that this is no longer the case. For example, a new Stater Bros. store with a sushi bar recently opened near my office. Multiple times per month, instead of going to one of the local restaurants to grab myself something like a smoothie, a chicken or poke bowl or a sandwich I go to Stater Bros. and buy what I think is really good sushi and a small bowl of fruit.
As many of the newer grocery stores have expanded their offerings, including adding restaurants inside their stores, the grocery industry is clearly trying to claw back some of the revenue they’ve lost to many of the quick service and fast food restaurant concepts.
Food – The Most Competitive Industry: It seems clear that the food industry is the most competitive within the retail world. Each grocery store or restaurant that opens appears to offer something unique in a trade area that is intended to take sales from a competitor. And the competition for our stomach is huge. Fortunately, so are our tastes. How often have you gone by a restaurant and wondered “who goes there” only to then find out that people that you know love the place. Our choices, especially in Southern California, are abundant which is great for the consumer.
Restaurant Spaces Are Valuable: The demand for restaurant space is truly impressive right now. Our leasing team has indicated that for the most part when a restaurant space becomes available in one of their projects, they get very strong demand because of the substantial restaurant infrastructure within the space. This results in significant cost savings to the new operator. So far this year, 28% of our lease transactions have been with restaurants AND just about all of them being 2nd generation restaurant spaces.
Landlords Are Your Restaurant Tenants Keeping Up: Back in the day, for the most part a restaurant operator opened its doors, offered direct mail coupons, and relied on foot traffic and word of mouth. Today, it is so much more nuanced and difficult. There are Yelp and Google Reviews that can be the difference between success and failure. There are services like Door Dash, Uber Eats, Grubhub, and more that can significantly expand a restaurant’s reach beyond those that walk in the door. There is online take out ordering.
And let’s not forget all the social media platforms that can cause a small restaurant to suddenly have a constant line at the door (or no line at all). If you are a landlord and want to understand a restaurants chance of success, figure out how they are interacting with all these options.
Grocery Business Becoming More Niche: We are seeing continued expansion of Grocery Outlet and Sprouts (we have signed a lease with each this year) and it appears that Vallarta is in a rapid expansion mode with stores that are planned in Rancho Cucamonga, Colton, Riverside and Duarte. Costco recently opened in Highland and Trader Joe’s has stores slated for La Verne and Yucaipa. T &T Supermarket, Canada’s largest Asian grocery store will open in Chino Hills in 2026. Unlike the days when the market was mostly comprised of Ralphs, Albertsons, Vons and Stater Bros., all of which are very similar, today a grocery store needs to figure out its niche and how it will service its customers.
Final Food for Thought:
- Fellow Food Lovers – If you figure out how to eat more without needing to size up let me know as I would really like my eating to not have to be so finite.
- Property Owners – Find out how the restaurant in your property is performing by observation, communication with management, and using services such as Placer.ai. Review their online ratings and see if they are keeping up with all the technological trends and if they aren’t is it for a good reason (i.e.” we are so busy we can’t handle additional business through the app services”).
- Grocery Store Landlords – Similar to restaurants, you want to know how the store is performing by talking to management and obtaining as much factual and anecdotal information as possible. You also need to understand the demographics of your trade area to determine whether your grocery store is the right fit and whether the trade area is trending toward or away from your store’s customers. Also, know the competition in the trade area and how your store compares as it will determine the future success of your property/shopping center.
- Restaurant and Grocery Store Operators – THANK YOU for what you do. You are in a highly competitive unpredictable business, and I appreciate how difficult it is to run an independent operation or a large national chain.
The ultra-competitive nature of the food industry results in winners and losers, which frequently results in the need for real estate brokerage services. The Progressive Real Estate Partners team is available to, 1) Re-tenant a restaurant space; 2) Sell a vacant restaurant building or 3) Sell an existing restaurant building if the owner may not be able to handle upcoming change. And, even if you’re not currently in the market, we’re happy to discuss how trends in the grocery and restaurant industries could affect your properties in the future. Just let us know if we can be of service.