Food Carts to Franchise; Fulfillment Centers
July 20, 2014 • As you enjoy the languid, sun-filled days of summer, we want to point out two interesting real estate developments on the continuum of the age-old truth that the only constant is change. The first one confirms that you never know where the next big thing in retail is going to come from.
The Halal Guys could be the next big thing. They operate street carts in Manhattan that harken back to the days before food trucks became chic. The Halal Guys just opened their first brick-and-mortar location and more importantly, are planning to open at least 100 franchised outlets globally over the next five years.
Fransmart, the restaurant franchise consulting firm that transformed Five Guys Burgers and Fries into a 1,500-store chain, will be helping The Halal Guys in this endeavor. A decade ago the owners of The Halal Guys switched from selling hot dogs to selling halal food to cab drivers. In addition to cab drivers, their clientele now includes Manhattanites from all walks of life and throngs of tourists who wait on long lines to get what one fan characterized as the most perfectly crafted street meat. The question is: can you take street meat off the streets?
The second development is all about how e-commerce is affecting real estate, from retail to industrial. As e-commerce continues to grow, the demand for a new kind of warehouse/distribution center, often referred to as a fulfillment center, is exploding. Fulfillment centers are locations where goods purchased online can either be picked up by the customer or from which those goods are shipped to the customer. Fulfillment centers are springing up in a variety of locations including traditional retail stores, where the distinction between retail and industrial uses is being blurred and as stand-alone facilities.
The stand-alone fulfillment centers differ from traditional warehouses, where goods leave on pallets en route to stores, in a number of important ways. The ideal location for fulfillment centers is not the typical far-flung location of traditional industrial properties, but rather closer to population centers where the individual customer resides, cutting down on transportation costs and the time it takes to fulfill orders. Greater numbers of employees are required in order to sort and ship merchandise to individual customers. This translates into expanded parking requirements and other amenities not traditionally associated with industrial uses. Finally, the demand for fulfillment centers, both on the part of online retailers such as Amazon, as well as traditional retailers such as Macy’s or Bloomingdales has caused industrial vacancy rates to plummet.
We think both of these developments bode well for brick-and-mortar real estate.