By Gurjit Singh
Numerous businesses have seen an acceleration with the advent of the current crisis. The cloud kitchen business is one of them. Called by many other names; “ghost kitchens”, “virtual kitchens”, “shared kitchens”, “dark kitchens”; they all aim to fill a gap in the provision of a basic human need, food and beverage, at any point in time in a fast and hopefully, safe way.
The Restaurant Times provides an excellent insight into the rise of cloud kitchens in the UAE. With many F&B businesses facing deep business challenges and possible closures, should these businesses turn to cloud kitchens as a solution, temporary or permanent? Will these “conversions” eventually create a demand for more real estate space for cloud kitchen setups.?
The Edge provides some insight into the real estate implications , albeit from a different geographic perspective. The Oxford Business Group also provides further fresh perspective on the real estate implications. Wamda in their recent 2 part deep dive report ( Part 1 and Part 2 ) into the GCC cloud kitchen sector gives a good review into the business and debates if cloud kitchens are tech or real estate.
From my perspective, cloud kitchens are here to stay as a versatile business that is “platform-agnostic” in the current crisis, where it can provide a revenue solution to struggling F&B businesses and remain as a demand generator for vacant real estate space where property owners need to consider swing and turnover rental structures with a longer WALE ( weighted average lease expiry) with cloud kitchen business operators. All this, notwithstanding the preference by the big player cloud kitchens to buy and own their own premises.
Cloud kitchens can prove to be tenants and end user occupiers which provide better optics on recurring revenue streams for commercial landlords and help sustain and strengthen the cap rates for investment properties over the medium term as real estate heals in the current crisis. It is believed that cloud kitchens will move into CBD spaces within commercial complexes and present themselves as a hybrid of a take away and delivery service to provide the vertical integration within commercial buildings and the horizontal service of catering for the wider city centre district. Such modern and presentable cloud kitchen concepts are moving away from the “industrial location” perception and have sprung up in city centre locations in gateway cities like Singapore.
PropSherpa 
Absolutely Gurjit if Real-Estate has to survive in this market it must be prepared to re-invent its offerings to suit current trends. Smaller retail stores especially clothing and shoes categories for example will have to re-assess their commercial footprint considering the pre-covid era was all about having multiple locations to increase customer base. I have even heard of regional malls entertaining the idea of multiple large supermarket chains within their space post – covid as a result of increased online shopping competition in the sector especially to keep pace with the faster delivery times to win consumers. Asset managers will no doubt have to take the hit on their revenue in the short term to allow for such offerings until such time they reinvent themselves according to new trends like cloud kitchens.
LikeLike
Many thanks for your note Niraj. The relevance of real estate will be referred more in terms of the interdependency of spaces in the future. Some retail malls are having to become part “logistics” centers [ one stop logistics foot print for multiple brands – like a “cloud kitchen” for multiple brands] to enable exactly what you have mentioned – faster delivery times. Commercial office tenants will ask if there is a food service provider, like a cloud kitchen in the commercial complex, rather than if there is restaurant. Residential occupiers will ask if there is access to open space, private or communal, before they buy or rent a residential property. Polycentric locations will become more popular than the CBD for business and living because decentralization will shorten travel times and allow for more sustainable and safer modes of travel. We are into an era of managing the “reinvention” of many things.
LikeLike