Direct-to-Door Retail

Impact on Real Estate

By Erica Rascón on Sep 13, 2016 in News

Direct-to-door home meal services have experienced record-breaking growth. The past four years witnessed a 33 percent increase in delivery traffic, reports NPD group. This growth presents new opportunities for commercial and institutional real estate.

The Catalyst & Growth Potential

The growth of prepared meal services comes as a response to public cries for healthier, convenient food.

Americans are becoming more health-conscious.  The surge towards healthier fare comes on the heels of seemingly endless bad news: Almost 70 percent of American adults are diagnosed as overweight or obese. Rarely disclosed allergens in foods decrease the efficiency of digestive and endocrine systems. Processed foods continue to make headlines for dangerous ingredients and poor transparency practices.

Homemade meals using fresh produce and lean meats are a tried and true step in restoring health. But few adults feel that they have enough time to cook.

Adults are willing, however, to pay top dollar for homemade meals cooked elsewhere. Nielsen’s 2015 Global Health & Wellness Survey polled over 30,000 individuals online. Of the respondents, 88 percent are willing to pay more for healthier foods.  NPD reports an increase of 6 million fresh meal deliveries in the past year.

The convenience of online orders cannot be underestimated. Users avoid waiting at the drive through or detours to the grocery store during the commute home. User avoid expending emotional energy by talking to another human being. The potential of such convenience is limitless.

In this atmosphere, direct-to-door services will continue to grow.

Creative Sites

The real estate requirements of direct-to-door services vary, based largely on the popularity of the service. A few components appear to be consistent:

• Mature companies seek out numerous, small sites rather than vast distribution centers.
• These sites are centrally located to heavily populated areas with easy access to major thoroughfares.
• Parking and loading accommodations for 16-foot, single-worker trucks suffice for small and mid-sized companies.
• Larger distributors that use the depot model (such as Fresh Direct) require significantly larger loading bays and parking for their 24-foot trailers.
• Commercial kitchens and ample refrigerated storage are a must.

Vacancies within strip malls and shopper centers present familiar opportunities. Yet as more direct-to-door services enter the market, these small businesses seek creative and flexible rental opportunities.

A growing number of personal chefs are renting space at schools and churches. These spaces offer commercial kitchens, dry storage, refrigerated storage, and plenty of parking space. Their strategic locations in densely populated residential areas are also an advantage. Institutional buildings offer all of the essentials needed to kickstart a direct-to-door meal service.

Elaine Ratchford rented space at an early learning center near her home in the outskirts of Atlanta. The site served as the temporary home of Parents’ Night Out Meals and Catering.

“I picked the location for a lot of reasons,” Ratchford begins. “It’s less than half-a-mile from my house, so I didn’t have to worry about greens wilting or things defrosting in transit to the school. The school is right near the intersection of I-20 and State Route 20, so it was easy to get out and make deliveries once the food was done.  There are lots of neighborhoods around here so that means I had a built-in group of clients.”

The commercial grade kitchen at the school provided more than enough space for Ratchford. As an added bonus, she didn’t have to finagle with permits and licenses since the building was already permitted to create and distribute meals.

Direct-to-door meal programs can give a new purpose to shopping centers, as well as assets that are traditionally tough to lease, such as churches and schools. As Americans continue to reduced their consumption of food away from home, commercial real estate can benefit from this movement without missing a beat.