How remote work has reshaped the restaurant business

Big city downtowns are a bit quieter than they used to be. 

The shift to remote work during the pandemic has led to fewer people in big cities, especially during the week. 

Smaller cities and suburbs, meanwhile, are booming. This is having an impact on restaurants that typically sought out office workers for their business.

Here’s a look at what’s happening and what it means for operators.

Downtown traffic is recovering, but may never fully return

According to data from pedestrian traffic researcher MRI Springboard, foot traffic in U.S. city downtowns was down 23% during January through May compared to the same period in 2019.

That was actually a healthy improvement from last year, when traffic was down 33%, said Diane Wehrle, marketing and insights director for MRI Springboard, during a webinar hosted by the researcher on Wednesday.

But, “there still is a long way to go,” she said.

Wehrle believes that for the foreseeable future, there will be about 15% fewer people in big-city downtowns on weekdays.

This is in part because of remote work. While the number of people who work from home five days a week has declined, almost a third now stay home for part of the week, up from 22% a year ago.

“There are just not as many people in our downtowns as there once were,” she said.

Another factor impacting traffic is the ongoing migration to online shopping—a trend restaurants have become very familiar with. Though about 85% of retail transactions still happen in the store, the growth in online will likely continue to erode in-person traffic, Wehrle said.

The weekend is the new work week

While many people work from home for at least part of the week, some are showing a desire to get out of the house and head downtown on the weekend. 

Wehrle predicted that urban centers could soon start feeling close to normal on Saturdays and Sundays, with a foot-traffic gap of just 5% to 7% vs. pre-COVID numbers.

“What we’re starting to see is this greater relevance of Saturday and the weekend,” she said. Those days could become more important for big-city restaurants. 

Smaller cities are booming

Remote work may have stunted the population of big city downtowns, but it has done the exact opposite for smaller cities and suburbs. 

When people became able to work from anywhere, some of them moved from big cities to smaller ones. Others are simply spending more time in their local downtowns during the week because they’re no longer commuting. 

In Summerlin, Nev., downtown foot traffic was up nearly 8% in January through May vs. pre-pandemic, according to Springboard. In Boulder, Colo., it was 6.5%.

“Along with that demand has come enormous increases in sales,” said Ami Ziff, managing director of national retail for real estate investor Time Equities, during the webinar.

He said some retailers have seen productivity jump by 50% due to the “exodus” from big downtowns.

“Things have stabilized in cities, but the suburbs have benefited greatly,” he said. “There’s been a seismic shift, and they continue to have a large amount of wind at their back.”

Restaurants are changing their real-estate strategies

That shift has been felt by Bondi Sushi, an upscale sushi concept with six units in New York City. It was once focused on opening restaurants in or around office buildings, but following the remote work wave, “now we are very much mixed-use,” said co-founder Aiden Carty during the webinar.

An upcoming location, for instance, will open in Miami’s Brickell neighborhood. The area is known as the financial district but in recent years has also become more residential, creating a dense and walkable community. 

Carty said he views Bondi as a restaurant that is ingrained in people’s day-to-day lives and neighborhoods, rather than a destination brand that one might take a trip downtown to visit.

Other restaurants have adopted a similar strategy. Office-lunch favorite Sweetgreen has been widening its focus from urban cores to suburbs since the pandemic, while Chipotle has found success in smaller towns.

They're also changing their business models

Bondi has always done a mix of dine-in and to-go, but with more people staying at home during the pandemic, the off-premise business made a leap. It now accounts for more than 50% of Bondi’s sales.

So, in order to get people back into its dining rooms, Bondi has worked to differentiate the on- and off-premise experience.

“We only take restaurants with two doors, we prefer corners, and we try to create a specific identity for our dine-in business and our delivery business,” he said.

The two businesses are kept physically separate within the restaurant and sport a different look and feel. The takeout area is light and bright, while the dining room is darker and more relaxed, Carty said.

The differences extend to the menu: Bondi’s Express menu features boxes and bowls, while its dine-in selections center on nigiri and hand rolls.

“We’ve clearly tried to define those experiences so that you entice your customer to come and visit your restaurant and get a different experience at home,” he said.

But they’ll have to compete with retailers for space

In the post-pandemic environment, grocery stores and value-focused retailers have been among the most popular from a real estate perspective, Ziff said.

That includes dollar stores and other retailers that offer discount goods that appeal to inflation-weary consumers.

There has also been “unbelievable demand” for healthcare businesses, from large hospital systems to local doctors. 

At the same time, there’s interest in in-person entertainment, Ziff said—an area restaurants are in a good position to capitalize on.  

“We’ve seen really, really strong demand from experiential retailers getting back in growth mode,” he said.