Restaurant Real Estate Trends: Where and How Restaurants Are Leasing Now

Restaurant real estate is moving in two directions at once. Landlords want more food and drink, because restaurants bring people into malls and high streets that shops alone no longer fill. Operators, meanwhile, want less space per site, closer to where orders come from, and cheaper to fit out. The useful skill now is reading which of those forces is acting on the unit in front of you.

This post looks at the evidence for each trend, where the data disagrees, and how to use it when you choose a site.

Why are landlords giving more space to food and drink?

Because food draws visits that online shopping cannot replace. In India, a JLL analysis reported by IANS in September 2025 found that food and beverage rose from 16 per cent of retail leasing in 2023 to 22 per cent in 2025 across the top seven cities, with about 4 million square feet leased since 2023. JLL also said developers of destination malls plan to give up to 25 per cent of space to food and drink, and that high streets accounted for over half of food and beverage deals in the previous 30 months. Bengaluru led, with over a third of the volume.

Another major broker counts it differently. CBRE India put food and beverage at about 12 per cent of retail leasing for the whole of 2025, behind fashion at about 48 per cent, in a record year of about 8.9 million square feet. The two figures cover different periods, city sets and definitions, and neither publishes its method in full. Both agree on direction: food is taking a larger share, and CBRE notes demand for large, experiential units in premium malls and high street hubs.

What this means for you: a landlord who needs restaurants to fill a centre has a reason to negotiate. Ask for fit-out contributions, rent-free months or turnover-linked rent before you ask for a lower headline figure.

Are prime rents still rising?

Yes, modestly overall, with sharp rises in a few streets. Cushman & Wakefield's Main Streets Across the World 2025 report, covering 141 locations, found average prime retail rents up 4.2 per cent in a year, with 58 per cent of markets rising. The Americas averaged 7.9 per cent, Europe 4 per cent and Asia Pacific 2.1 per cent.

These are luxury shopping streets, not restaurant rows, so treat them as a signal of competition for the best corners rather than a guide to your rent. Restaurants rarely win the top pitch on a luxury street. They win the side street that the luxury street sends people down.

Are restaurant footprints getting smaller?

In quick service, yes, and the change is well documented. A 2024 Northmarq review of US brands describes Portillo's moving from stores of about 11,000 square feet to formats of 7,700 and 5,500 to 6,000 square feet, and Taco Bell's Go Mobile design at 1,600 square feet with no dining room. One industry expert quoted there expects typical units to shrink from about 3,000 square feet to 1,500 to 2,000. The same review cites 2022 data showing that 79.5 per cent of US restaurant traffic came from carry-out, drive-through and delivery.

That is a US picture, and it is strongest in fast food. Full-service and destination restaurants still sell the room. But the principle travels: every square foot of dining room must earn its rent, and the kitchen can now serve customers who never come in. If part of your volume is delivery, our guide to ghost kitchens and virtual brands covers where a delivery-only kitchen still makes sense.

Why is second-generation space so attractive?

Because someone else has already paid for the expensive parts. A second-generation unit is a former restaurant with extraction, grease traps, gas, drainage and often a cold room in place. The same Northmarq review quotes IHOP's president estimating that converting existing restaurant space cuts construction costs by 30 to 40 per cent against a new build, and that it speeds up permits.

The saving is real, but so are the traps:

1. Inherited faults. Old ducting, undersized power or a failing grease trap can cost as much as new. Survey before you sign.
2. The last tenant's story. Ask why they left. A site that failed three times may have a footfall problem no fit-out can fix.
3. Key money and equipment. Outgoing tenants may ask a premium for kitchen equipment. Value it as used equipment, not replacement cost.
4. Lease terms. A short remaining term or a reinstatement clause can wipe out the saving.

Our commercial kitchen requirements checklist helps you inspect the plant, and our list of restaurant lease red flags covers the clauses to read twice.

What is happening to struggling malls?

They are becoming an opportunity for patient operators, with a footfall risk attached. In December 2025, Knight Frank counted 74 "ghost" malls among 365 shopping centres it surveyed in India, covering 15.5 million square feet, while vacancy in Grade A malls was just 5.7 per cent. It identified 15 of them as high-potential for revival.

The gap between the best and the rest is the point. Prime malls have little space and strong rents. Weak malls have space and need anchors. A well-known restaurant can sometimes secure very good terms in a centre being repositioned, but it also takes on the risk that the revival never comes. Ask for a break clause tied to the landlord's own plans, such as an anchor store opening by a fixed date.

Rent is a price for footfall you have not yet seen. Pay for what you can count.

How do property taxes change the sums?

Occupancy cost is rent plus taxes and service charges, and taxes can move independently of the market. England offers a current example. From 1 April 2026, the 40 per cent business rates relief for retail, hospitality and leisure ended and was replaced by permanently lower multipliers. According to North Northamptonshire Council, the multiplier for smaller hospitality properties (rateable value under 51,000 pounds) is 38.2p in the pound, against 43.2p for other businesses of that size, and 43p against 48p for those under 500,000 pounds. A revaluation took effect on the same date, with transitional caps on increases, and eligible pubs and live music venues get a further 15 per cent relief for 2026/27.

The lesson travels. In any country, ask what the property tax will be after the next revaluation, not just this year, and whether hospitality is treated differently from other uses.

How should you use these trends when you choose a site?

Use them to sharpen questions, not to replace site visits. A short sequence:

1. Decide your sales mix first. If a third of sales will be delivery or takeaway, you need less dining room and a better kitchen position.
2. Check the landlord's position. A centre that needs food tenants will trade incentives. A full one will not.
3. Prefer second-generation space, then inspect it hard. Budget for a survey of extraction, gas and drainage.
4. Model total occupancy cost. Rent, service charge, property tax after the next revaluation, and any turnover rent.
5. Count footfall yourself. At the hours you will trade, on weekdays and weekends.

For a full framework, see how to choose a restaurant location.

Key takeaways

• Food and drink is taking a larger share of retail leasing in India, though brokers disagree on the size: JLL says 22 per cent in 2025, CBRE about 12 per cent for the year.
• Prime retail rents rose about 4.2 per cent worldwide in 2025, with double-digit rises on some Indian streets.
• Quick-service footprints are shrinking as off-premises orders grow, at least in the US data.
• Second-generation restaurant space can cut build costs sharply, but only after a proper survey.
• Weak malls offer good terms and real risk. Tie your lease to the landlord's revival plan.
• Model total occupancy cost, including property tax after the next revaluation.