The National Restaurant Association has some very bad news for the industry: What real estate investors need to know

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It’s no secret that restaurants have been among the hardest hit businesses during the pandemic. At the start of the crisis, food establishments were forced to close their doors to in-person diners. Then, once allowed to reopen, they faced continued restrictions that were eventually lifted, but at a time when supplies were getting harder to come by and workers harder to hire.

At this point, many restaurants are struggling with rising food and labor costs and ongoing supply chain issues. And while many consumers are eager to return to restaurants after staying away for much of the pandemic, the outlook for restaurants is still extremely bleak.

A hard pill to swallow

The National Restaurant Association recently issued a dire warning to the industry that it will never return to its pre-pandemic state. The trade group insists that 2022 will be a new normal for the industry, and whether that’s good or bad is yet to be determined.

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Reading between the lines, it’s clear that restaurants will have to operate differently in perpetuity due to changing customer habits and behaviors. On the one hand, the days of bringing guests together table after table may be over. Restaurants will now still have to limit their capacity to some extent to meet customer tolerance levels. And fewer diners means less revenue.

Now, the good news is that the National Restaurant Association predicts that restaurant sales will increase in 2022 to $898 billion, up from $864 billion in 2019. At the same time, however, only 25% of restaurant owners believe their business will be more profitable. this year than in 2021.

Recruitment challenges could also drive many restaurants out of business. A full return to employment is not expected for the industry this year. And given that industry quit rates were 10.2% in December, it’s fair to assume that restaurants will struggle to meet their staffing needs, even if they introduce higher salaries to the workforce. the mix.

Then you have to deal with rising costs. Inflation is hammering small businesses across the country, and restaurants are no exception. A full 90% of restaurateurs believe costs will continue to rise throughout 2022, and 96% don’t believe supply chain issues will be fully resolved this year.

A potentially heavy blow for real estate investors

A thriving restaurant scene can benefit communities and local property values, both commercial and residential. On the other hand, restaurant closures can cause property values ​​to plummet.

As such, real estate investors stand to be hurt if the restaurant industry as a whole does not recover from the impact of the pandemic. Commercial landlords with restaurant tenants could particularly feel the pain, as the closures could lead to vacancies and lost revenue.

Of course, restaurants have a few key things going for them right now. The economy is strong, unemployment levels are falling and pent-up consumer demand is expected to emerge following the surge in the omicron. But whether that’s enough to keep restaurants in business remains to be seen.

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