Investors seek a fast food fix
Catherine Harris looks at how investors are seeing takeaway sites in a different light.
Fast food is hugely popular in New Zealand, and the amount of commercial space fast food chains occupy makes them influential players in the property market.
Between them, the major chains have more than 800 outlets in prime locations across New Zealand, most of them leased.
Traditionally fast food retail has not been seen as a preferred investment, but after the sector weathered the global financial crisis well, buyers are changing their tune.
‘‘Most fast food retail sites are occupied by financially secure restaurant operators on long-term leases,’’ Bayleys national director commercial John Church said.
‘‘Because the sector has proved resilient in economic downturns, it is almost unheard of for major chains to vacate sites.’’
‘‘For buyers, the biggest hurdle is supply and demand. Fast food retail sites in high-value locations rarely appear on the market and when they do, they sell quickly.’’
Fast food outlets in central city locations tend to range from about 110 square metres to 201sqm, while large drive-thru restaurants can take up as much as 5000sqm.
As is the case with many commercial leases, the tenant is responsible for the property’s ongoing costs and day to day management.
Burger King’s franchisee in New Zealand, Antares Restaurant Group, leases the land and buildings for 81 restaurants..
‘‘When choosing a site, we look for long-term relationships, transparency and fair terms in rent,’’ Antares development manager Kevin De Jong said.
‘‘We are always looking for new opportunities and have ongoing growth targets for new restaurant openings.’’
Unlike other major chains, McDonald’s owns most of its real estate. In New Zealand it has 168 restaurants covering more than 100,000sqm, and owns 89 freestanding sites.
McDonald’s New Zealand national real estate manager Warwick Stevens said the chain preferred bare land to avoid potential demolition costs.
‘‘We don’t have a problem buying land and sitting on it for five to 10 years knowing the growth of Auckland, especially is going to happen. You simply can’t make a lease model work like that.’’
New methods of delivery and high CBD rents mean prime locations are less important in some cases and the suburbs are becoming an option.
Most of the big brands now offer home delivery and Domino’s Pizza – which has more than 100 stores in New Zealand – successfully tested drone delivery late last year.
McDonald’s is also experimenting with home delivery and has a partnership with UberEats.
But none of that means the end of its high-profile restaurants, Stevens says. In fact, in Auckland’s CBD, it’s keen to buy more.
‘‘When we look at the Auckland CBD ... we’re under-represented.’’