Plans by fast-food chain Taco Bell to open 300 new small-format restaurants across the country in the next four years are the latest being undertaken by a slew of major national brands experimenting with smaller stores to cut real estate costs and cater to urban millennials.
Taco Bell, Nike, Target, and Nordstrom are just a handful of major brands looking to increase market share in the national and Philadelphia commercial real estate market – and, at the same time, wring out more dollars per square foot of space in expensive urban markets – by opening smaller brick-and-mortar stores.
This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
The decision reflects a rapidly evolving retail environment in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – that is forcing retailers nationwide to reevaluate their real estate footprints. That scramble for space offers property owners and developers new opportunities to reconfigure properties and reshape their tenant mix.
“It’s not much different from what a lot of office users are doing right now,” said one industry expert. “Everyone is trying to be smarter with their space and realize the savings that comes from that.”
Sales at small-format stores among all national and Philadelphia commercial real estate properties outgrew those at larger stores by almost 400 percent in 2016 and now constitute more than a $1 trillion market, according to a 2018 report by Koupon Media. It added that 51 percent of millennials – those between the ages of 22 and 37 — say a store’s location is the top factor in a purchase decision.
In other words, the success of small-format stores also relies on convenience.
That’s a driver behind fast-food purveyor Taco Bell’s plan to open – in the next five years – 125 mostly small-format restaurants in New York City, instead of utilizing any other available U.S. and Philadelphia commercial real estate listings. The company said it was under-developed in New York and wanted to tap into the city’s thriving urban market.
The Irvine, California-based company’s small-format restaurants — called Urban In-Line and Cantina — are tailored for “highly walkable areas” and have no drive-through windows. The smallest are just 1,200 square feet. The company plans to open 1,000 new restaurants across the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – in the next four years. Thirty percent will be smaller-format concepts.
Many companies opening smaller stores are using technology to capture customer data and personalize the shopping experience.
Nike this year unveiled Nike Live in Los Angeles, a small-format, 4,600-square-foot store that coincides with the release of the Nike app designed to gather customer information and which allows shoppers to reserve items online, scan barcodes for product information, and book personal appointments with in-store experts.
Nordstrom last year launched Nordstrom Local, a 3,000-square-foot store in Los Angeles’ tony Melrose neighborhood with no inventory. Shoppers can pick up items there and even order a drink. It plans to open more.
Target is opening small format stores with an average store size of 50,000 square feet, compared to 170,000 square feet in its larger store, by utilizing both national and Philadelphia commercial real estate listings in urban areas across the country.
The small-store trend “shows no signs of slowing, which will inevitably lead to continued growth of small format in 2018 and beyond,” the Koupon report said.
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