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Consumer financial woes blamed for falling restaurant revenues

On Behalf of | Aug 1, 2016 | Commercial Real Estate |

The rise of e-commerce and online shopping has been hard on brick and mortar retailers, and many shopping mall operators in California and around the country have looked to restaurants to fill large retail spaces vacated by anchor tenants like department stores and big-box outlets. Americans spend more of their food budgets in restaurants than they do in grocery stores, but that spending has been slowing down of late. While restaurant spending was up by 6.25 percent in the first quarter of 2016, growth rates in both sales and foot traffic have been falling since mid-2014.

Economic experts say that consumers are spending less because they are anxious. Politicians have found stoking fear to be a reliable source of votes in a particularly contentious election campaign, and few pundits expect the rhetoric to be toned down before the nation heads to the polls in November. Sharp increases in health care and housing costs have also left many American families with less money to spend in restaurants or shopping malls.

With even household names like McDonald’s, Dunkin Donuts and Chipotle struggling, shopping mall developers and operators may be forced to rethink their restaurant strategy. Tenant sales at class-A malls, defined as those which generate revenues of at least $450 per square foot, turned negative during the first quarter of 2016, and that has some experts worried. Tenant sales in class-A malls were up 7 percent in the third quarter of 2015.

Economic peaks and troughs are to be expected in a free market, and attorneys with real estate experience may work with commercial property developers, investors and owners to separate short-term tendencies from long-term trends. Attorneys may also help shopping mall owners to attract new commercial tenants by revising their lease agreements in order to make them more flexible and attractive to retailers and restaurateurs.