Why food has become the next big ingredient for tenants in commercial property
Blue-chip tenants – whether it’s an accounting, law or tech firm – are all looking for one thing when hunting for a commercial property: food.
Having quality food retailers has become one of the must-haves for tenants looking for an office in commercial buildings, according to m3 Property’s Amita Mehrotra, who heads up the food and beverage master-planning services division.
“Before tenants weren’t specifically looking at the food-and-beverage offerings in offices, it was mainly the public transport and location. (But now), food has come a long way in terms of expectations,” she said.
“It’s become a priority to make sure that the food-and-beverage offering is good in the commercial office.”
The MLC Centre in Sydney’s CBD is an example of a commercial tower which has focused on its food offerings. Photo: Hamilton Lund Photography
Ms Mehrotra noted that tenants were looking for commercial buildings that have different cuisines, with open-plan spaces around them for socialising and business meetings, and a mix of independent operators and brand-name chains.
Suzee Brain, director of food consultancy Brain and Poulter, said some larger tenants were even going one step further by offering food within their own office spaces.
“Both PwC and Leadlease have gone for a quite bespoke and varied food offering for their employees inside their new office towers in Barangaroo; (they’re) not expecting their employees to leave the building anymore,” she said, adding that this competed with the landlord’s retail rental income, which was higher than office rent.
“The cafe operator within the tenant’s space is paying a much lower rent, because it’s office rent, compared to what it would be as retail rents.”
As the workforce becomes younger, millenials, who eat out twice as frequently as previous generations, are the driving force behind the Australian dining boom, which generates $45 billion a year, Intermedia research shows.
Melbourne is the country’s foodie central, with 2700 registered food retailers in the CBD alone, while Sydney’s CBD has 1500. The number is growing at a rate three times faster than other retail, Brain and Poulter data shows. Together, the two markets have 900,000 square metres of gross lettable area devoted to food under their belts.
Internet-proofing shopping centres
Shopping centre managers were also dedicating more of their tenancy mix to food retailers to cushion malls from the threat of online shopping, as dining out provides an experience that can’t be replicated online, Ms Brain said.
In many instances these food retailers were being elevated to anchor-tenant status by shopping centres to drive up visitor numbers, Ms Mehrotra said.
Shopping centres are internet-proofing their assets by ramping up food offerings. Photo: Louie Douvis
“Shopping centre developers have realised that footfall [foot traffic] and dwell time can only be increased through the introduction of various food-and-beverage categories and entertainment.”
This is backed by JLL’s latest retail survey, which shows food-based retailing strategies are preferred by most shopping centre managers aiming to improve trading performance of their centres.
Ms Brain said food catering in shopping centres was still in a growth phase, with only one in five restaurants and cafes inside a mall, mainly because popular dining times fall on Friday, Saturday and Sunday nights, when most shopping centres don’t trade.
“Food and beverage is growing as a percentage of the total gross lettable area, but still well (below) our Asian counterparts, which can be about 20 per cent of the shopping centre’s total mall space. But in Australia, we’re still only hitting 4 and 5 per cent,” Ms Brain said.
