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India’s Booming F&B Real Estate: A New Era Unfolds

The Indian Food & Beverage (F&B) Industry is growing at a staggering pace. Not only has the market recovered, but the average footfall has crossed pre-pandemic levels.

Numerous categories including fine dining, casual dining, fast food centers, and restobars are growing at a fast pace. Likewise, the demand is also rising for other categories such as cafes, bakeries, and ice cream parlors.

As per the market estimates, the size of the overall F&B market presently is around USD 17.5 billion in 2023. Out of this, the organized market is sized at around USD 5.3 billion. A large chunk of the Indian F&B industry is still run by unorganized entities such as local sweet shops, snack centers, dhabas, tiffin centers, food carts, and kiosks. The silver lining is that the growth of the organized segment has greatly outpaced the unorganized entities over the past 10 years.

The overall sector is thriving on the back of market factors such as a surge in disposable income, a transformation in consumer preferences, young demographics, and a growing corporate culture in the country. Other factors such as a surge in women in the workforce, growth in nuclear families, and a tendency to spend more time outdoors after remaining indoors for a long time during the pandemic are also accelerating demand for organized eateries in the country.

As malls, shopping centers, SCOs, and commercial neighborhoods are rising rapidly, they are further paving the way for the growth of organized F&B. Meanwhile, the recovery in the hospitality industry with a rise in premium brands is also giving a buying boost to the segment. Most of the 3, 4 and 5-star hotels in India have separate restaurants, restobars, pizzeria, and roof-top cafes.

Demand For Diverse Food Will Fuel Expansion

As eating out is gaining momentum in India, F&B real estate is also set to grow at a momentous speed. Presently, the size of F&B real estate in India is close to 345 million square feet and is growing at a CAGR of around 15%. The size is set to cross 900 million sq. ft. by 2030.

The demand will emerge from numerous quarters. Successful international franchise-based brands such as McDonald’s, KFC, Subway, Taco Bell, Pizza Huts, Starbucks, Barista, Domino’s, and Burger King will continue to expand and also eye smaller cities and towns. Meanwhile, India-based brands such as Haldiram, Bikanervala, Yo China, Burger Singh, Chayos, CCD, Chai Point, Sagar Ratna, and Indian Coffee House will also continue to grow.

Likewise, pubs and lounge bar chains, ice cream parlors, fast-food centers, and food courts are going to grow aggressively in the foreseeable future. Similarly, not only are bigger chains moving from metros to smaller cities but also many ethnic chains from Tier-2 cities will gravitate towards metros. Due to increased migration, the demand for local food is growing in big cities. Today, in metros such as NCR, Mumbai, and Bangalore, it is not uncommon to witness ethnic restaurants from Rajasthan, West Bengal, North East, South India, and Goa.

The growing Instagram and food vlogging culture has also been instrumental in spreading awareness about local food items and ethnic cuisines.

Mapping The Way Forward

The market will continue to rise upward with a pipeline of around 550 million sq. ft. of GLA expected to enter the segment. Around 330 million sq. ft. will comprise the carpet area and kitchen space will consist of 165 million sq. ft. Others will include offices and other spaces.

The market will continue to see a shift towards more organization with tailwinds such as a vast aggregate market, growing disposable income, and a shift towards branded eateries.

This will naturally result in increased demand for restaurant real estate services. The restaurant real estate has its own specifications and realtors will have to understand this. Not adopting the right approach can result in cost overrun and affect the occupier as well as the investor’s interest. Restaurant real estate advisory requires an in-depth understanding of the business, market demand, layouts, property condition, past tenant track record, etc. Likewise, realtors also need to take a close look at other important parameters such as visibility, accessibility, footfall, and competition.

The time has come when F&B can’t just be an aspect of retail or commercial real estate. It will emerge as a separate stream in the CRE space.

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