Net Lease News

B+E Weekly Newsletter

August 1 – August 7, 2023

MARKET

PRIME NET LEASE PROPERTIES ‘FLYING’ OFF-MARKET, BUCKING OVERALL CRE TRENDS | GlobeSt

• The best net lease properties are “flying off the market” despite dropping sales volumes for commercial real estate more generally, according to Camille Renshaw of B+E Net Lease.
• The best properties are trading quickly, especially for price points under $5 million. Cash-flush family offices and private investors still need to trade, making decisions that are tax-motivated or involve generational wealth.
• From a trend perspective, Renshaw is betting big on car washes, noting the current bonus depreciation allows an 80% write-off of the asset in the first year of ownership.

COMMERCIAL REAL ESTATE RESETS, BUT DOES NOT FUMBLE | Institutional Investor

• A challenging year lies ahead for real estate markets, but this is not 2008. The combination of high inflation and high-interest rates will have an expected hit on the entire real estate sector in 2023, but underlying fundamentals point to a market that will persevere.
• The long-term prospects of real estate fundamentals continue to be strong for the private investor, despite current difficulties. Market dislocations might actually create strong buying opportunities in the next 12-18 months.
• In the long run, patience will be key for the private commercial real estate space this year. Demand is still strong, and consumer spending is healthy enough to maintain the advancement of sectors that have recently risen in popularity.

RETAIL

TACO BELL CONTINUES YEAR OF RECORD GROWTH AND TECH INNOVATION | QSR Magazine

• The brand was recently named one of Time Magazine’s Most Influential Companies of 2023.
• That level of external recognition and marketing impact was made possible by Taco Bell’s tech innovation. Its digital channel increased almost 35 percent year-over-year, thanks to in-store kiosks now deployed in 100 percent of restaurants.
• Taco Bell’s same-store sales rose 4 percent in the second quarter, fueled by an expansion of hours and growth in the breakfast and late-night dayparts.

SHAKE SHACK TELLS PROFITABLE GROWTH STORY IN UNCERTAIN ECONOMIC TIMES | QSR Magazine

• In the second quarter, the fast-casual reached a 21 percent operating margin—a 240-basis-point increase year-over-year and the best mark since 2019.
• CFO Katie Fogertey said Shake Shack’s margin outperformance began with strategic pricing and increasing the difference in prices across markets to align with regional and guest demographics. Overall, menu prices were up in the high-single digits in the second quarter. The plan will be to raise prices by 2 percent in select locations in the back half of the year.
• Shake Shack ended Q2 with 471 restaurants around the world after opening 10 U.S. company-operated stores and 13 licensed units. That breaks down to 305 U.S. and 166 international locations. 

RESTAURANT CHAINS LOOK TOWARD EXPANSION IN RECOVERY FROM PANDEMIC | CoStar

• Executives of major restaurant chains are hungry for location expansion as some get enough long-awaited relief from soaring food and supply costs to make up for still-elevated construction expenses.
• Yum Brands, which operates more than 55,000 global franchised locations of KFC, Taco Bell, and Pizza Hut, reported opening 1,025 new restaurants in its second quarter and a total of 1,800 in the first half.
• “We expect to open approximately 30 new distribution points by end of year, bringing our global ghost kitchen total to over 80,” Dine Brands CEO John Peyton told analysts during his company’s earnings call.
• U.S. restaurant sales totaled $88.9 billion in June, up 8.4% from a year earlier, according to the latest Commerce Department data.