Cannabis Retail, Senior Housing and Restaurant Construction Lead the Way

Englewood’s business development team attended ICSC’s CenterBuild conference in December, where conversations revolved around retail activity and opportunities in 2020. The event also included ICSC’s 2019 North America Design and Development Awards, where Englewood, along with client American Girl and project partners, was recognized for its work on the American Girl Place store in New York City.

It has become a bit of a tradition that we start off the year for Hard Hat Chat with a look at the commercial real estate trends we think will impact our work in the months ahead. As we kick off 2020, we have a lot of optimism about our industry and the sectors we’re active in, but we also recognize there will be challenges ahead. Here are four commercial construction and commercial real estate trends we expect to shape our business and our industry:

1. The Green Rush Surges On:
Between 2018 and 2019, Englewood’s work in the cannabis industry grew by 100%, and we expect that trajectory to continue as more states legalize recreational marijuana use and cannabis firms expand into new markets. As we’ve discussed previously on this blog, there are unique challenges and opportunities associated with work in this arena. We recently weighed in on the topic of cannabis and CRE in a Chicago Construction News article on 2020 commercial real estate trends – here’s an excerpt:

“These projects don’t follow the typical progression because cannabis firms frequently move forward with construction planning while they are still pursuing licensing in order to be up and running when legalization goes into effect,” Taylor said.

“The review and approval process is also much more in-depth, since many municipalities are still interpreting new state laws and deciding what regulations they’ll add at the local level. While the rules vary from state to state, it’s helpful for our clients that we’ve worked on cannabis projects in multiple markets, so we can anticipate questions or issues that are likely to arise at the municipal level.”

2. Senior Living Operators Thinking Long Term:
There’s been talk in the senior living sector that construction of brand-new senior communities has caught up to demand, and some media outlets are even saying senior housing is facing a glut. However, we expect senior living construction remodel and refresh projects will continue to be strong in the next decade due to owners’ and operators’ long-term property investment strategies. When we first started working in the senior living space, the bulk of our projects involved updating older properties to compete with the new-construction options coming to market. Now, even with properties that were built or remodeled within the last five years, we have owners coming back to us to make cosmetic updates and reconfigure amenities and common areas as part of the ongoing maintenance of these communities and to keep properties current for the long haul.

3. Retail Developers Will Play All Sides: 
Our team just returned from the International Council of Shopping Centers’ CenterBuild conference in Phoenix, where conversations revolved around many of the same topics we’ve been hearing about all year – retail activity being down, using entertainment-based concepts to revitalize traditional malls, and discussions of what to do with vacant mall anchor space. While predicting that retail will continue to struggle to regain its footing in 2020 is nothing new, we do expect the coming year – and the coming decade – will be a time of transformation for the retail sector as developers and brands alike experiment to find a successful formula.

For example, one new strategy we started to see in 2019, which could grow as a trend in 2020, is major mall developers either buying out or partnering with retail concepts and then using those brands to populate their own vacant tenant space. This just goes to show how retail players are exploring their business from all angles and taking a non-traditional approach as they work to stay relevant with consumers.

4. Restaurant Construction Continues To Deliver:
Our work with national restaurant brands held steady in 2019, and all signs point to this sector continuing to feed a pipeline of work in the New Year. That will include new-construction projects with brands either expanding their footprints or relocating to better-positioned real estate in current markets, as well as remodel and renovation work for brands refreshing existing restaurants and refining their concepts.

Another interesting restaurant construction trend we are seeing in terms of renovation jobs is restaurant groups reconfiguring back-of-house space to accommodate growth in their delivery and catering business. Many brands are seeing an uptick in revenue from these areas, particularly with the popularity of services such as Uber Eats and Grubhub, and so we are working with them to create separate kitchen and prep areas for delivery and catering orders to keep that function from interfering with service in their main dining room. There’s also new opportunity in the construction of “ghost kitchens” – stand-alone food service locations that are either an extension of an existing restaurant or a unique brand, which are entirely dedicated to fulfilling orders via food delivery apps.

Happy New Year from Englewood Construction! We look forward to our next decade of sharing commercial construction insights and trends with you on Hard Hat Chat. If you want to talk, contact me here.

Chuck Taylor

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