Retail stores and restaurants are looking to adapt to the future; however, the past may be catching up with them. It’s no secret that businesses around the world were upended last year and this year has felt like a repeat so far. However, that sense of déjà vu reaches all the way back to the Great Recession and it may be the ticket out of this mess. The transformation of commercial real estate is reacting in a similar fashion to the recession of the early 2000s and companies newfound focus on smaller footprints and off premise sales will ensure that tomorrow is brighter than today.

The “death of physical retail” has been greatly exaggerated over the last few years. The pandemic and the lockdowns that followed it should have been the final blow; however, physical stores are still around and the last year has proved just how crucial they are. Companies that performed well during 2020 aren’t just sitting back and improving their websites, they’ve doubled down on expansion. The transformation of real estate begins to take shape when we learn that these expanded stores may not look like what we are used to. For example, Wendy’s is planning to open 700 new stores in the coming years and every location is planned to be a ghost kitchen. These ghost kitchens lower the operating costs with smaller footprints for foodservice chains and allow them to reach new audiences. For restaurants, this kind of expansion will become the norm and be combined with more traditional locations and hybrid models that do not feature interiors for guests. There will still be a restaurant on every corner, but the way we interact with them could be drastically different.

The future of retail will take a similar shape to restaurants. Some big brands like Macy’s are turning their attention to stores will smaller footprints and are specifically located away from malls. The pandemic has also increased the interest in discount stores that inherently fit better with smaller locations. Expansions of the future could include four small stores spread out over a state in lieu of one large store in a high traffic area. Like restaurants, retailers have been more open to adapting and coming to customers. Priorities have shifted from getting a customer’s foot in the door to getting a retailer’s foot in the customer’s door. We saw this kind of rapid expansion take place after the Great Recession and it ended with mixed results. Back then, the most successful retailers purchased property from their failing competitors and expanded almost unchecked. Unfortunately, as the economy improved, property leases increased. Many companies found that they had spread themselves to thin and they crumpled under the weight; however, it appears that companies are adapting to avoid a similar fate. Smaller properties are easier to manage and underperforming locations can be closed without a large loss. Many of these smaller restaurant and retail locations will also feature more curated menus and merchandise. Stores that are less feature rich could be a negative for consumers, though the format would allow the stores to reach areas that wouldn’t be possible otherwise.

Retail and foodservice will continue to adapt as we move through this pandemic. The ideas being put into action now will have far reaching effects on real estate. This transformation will echo those of years past; however, it appears that companies have learned from those mistakes. Smaller stores will increase the reach for expansionist companies and it will look significantly different than what has come before. This adaptation is the first of many that will use the knowledge of the past to drive the future.