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Retail Real Estate Trends: In-Store Restaurants and Hip Hybrids are On the Rise

High-End Cuisine and Artisanal Coffee Draw Customers, Boost Sales

The grand department stores of yesteryear – Marshall Field’s, Hudson’s, Wanamaker’s and others – always featured a “tea room” where elegant ladies could enjoy refreshments during shopping sprees. Over the decades, in-store food service has changed, along with shopping styles, but it’s never gone away. Today, Starbucks keeps Target shoppers caffeinated, McDonalds fortifies bargain-hunters at Wal-Mart and Ikea continues to serve up Swedish meatballs and other Nordic favorites. At the higher end of the shopping spectrum, Nordstrom operates multiple restaurants throughout its chain, boasting a total of seven different food service concepts and 200 eateries and coffee bars in its properties. Still, new food-related retail real estate trends keep emerging –and they’re definitely not your grandmother’s tea room.

Department Stores, Branded Shops Build Traffic with Quality Food and Drink

When Fodor’s, the venerable publisher of travel information, starts listing the 10 best in-store restaurants, it’s a sign that store-based dining has reached both a critical mass and a quality high-point. On the retail real estate NYC scene, big name chefs like David Burke preside at Bloomingdale’s. Hip restaurant brand Momofoku Milk Bar operates out of Soho’s Band of Outsiders boutique – right in the front window. Lord & Taylor shoppers can take a break at branches of Sarabeth’s. Ralph Lauren recently joined in with a main level coffee bar (featuring Lauren’s own brand of beans) and a full-service restaurant upstairs at its Fifth Avenue flagship. Among the latest to join the in-store food trend is Urban Outfitters, who opened a three-floor venue on Herald Square in June –the largest in their 400-store chain. A main floor feature is an outpost of Intelligentsia Coffee of Chicago, “designed to serve an ocean of coffee to thousands of passers-by each day.”

At Tommy Bahama’s “Lifestyle” Stores Food and Drink Reinforce the Brand

A brand-oriented take on the in-store food service trend in retail real estate is Tommy Bahama’s Island concept. The resort-themed menswear company has launched 13 “Island” stores, where shoppers find an immersive environment that includes tropical cocktails and menus, a perfect backdrop to the brand’s beach-y fashions and accessories. Tommy Bahama reports that its “Island” stores, located in such venues as The Woodlands Mall in Dallas, Corona del Mar Plaza in Newport Beach, and Scottsdale’s Kierlands Commons, generate two and a half times the sales per square foot as their other 97 locations.

At Hip Hybrids, Store and Restaurant Merge for a Single Customer Experience

Saturday’s Surf may have launched the hybrid trend in NYC retail real estate. The five-year-old Soho-based boutique (now with three additional locations) offers surfboards, accessories and a full line of surf-inspired menswear. Its artisanal coffee bar is integrated into the selling floor. Co-founder Josh Rosen, who is expanding into new markets, insists that coffee is so essential to his business that any new leases must permit beverage service. Management at Shinola, a Detroit-based merchandiser of watches, bikes and accessories with shops in NOHO and Tribeca, second Rosen’s sentiment. “Sights, sounds, and smells of a café bring a no-fuss feeling to a luxury goods store,” they said in a recent statement.

Custom-brewed coffee, along with craft beers, is fueling the success of lifestyle retailers on the West Coast, who, like Saturday’s Surf and Shinola, merge merchandise and refreshments in a single space. In Portland, Velo Cult, which purveys bikes and all things bike-related, relies on the “nerdiest black coffee around” and a menu of local beers, along with live music and film screenings, to pack their “man cave” venue. Seattle-based Chrome Industries, designer and manufacturer of bike-related clothing, footwear, bags and accessories, has six “HUBS” or stores in San Francisco, Seattle, Portland, Chicago and recently New York City. San Francisco’s famed Blue Bottle Coffee is the go-to beverage and like Velo Cult, music and screenings are key parts of the mix.

What’s this latest in-store eating and drinking trend all about? Beyond attracting and satisfying the customer, there’s doubtlessly the recognition that in-store amenities like high-quality coffee and unique menu options enhance the shopping experience beyond just browsing and buying. Shopping centers with a rich tenant mix have picked up on this retail real estate trend, just as urban stores and boutiques have. Here’s a powerful competitive edge that online can’t match.