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As discussed last week, 2023 was a year that forced restaurant operators to stay agile amid inflationary headwinds and changes in consumer behavior, daypart shifts, new approaches to drive-thru, and population migration changes. This week’s ICR Conference also gave us a chance to speak with the management team from more than 25 restaurant chains as well as their investors to better understand their lessons from 2023 and how they plan to apply them in 2024.
Despite most chains reporting that visits are still down on a year-over-year basis, there was a sense of optimism among many of the operators we spoke to. Many acknowledged that there were still pressures weighing on consumer spending, but that the strategies put in place during 2023 to stabilize visitation trends had been working (including an emphasis on value, elevated experience, adopting new restaurant formats to better address a wider range of commercial property types, and new menu innovations). Several management teams acknowledged that the contractor availability and equipment supply chain bottlenecks that had plagued new store openings in 2023 had started to dissipate, with several chains planning to resume or even exceed their pre-pandemic pace of restaurant openings (although many admitted that new store buildout costs are still running 25%-30% higher than they were 5 years ago). Given the higher costs involved with new store openings (and the risk of opening a location in a subpar site), there was a heavy emphasis on harnessing new data sources to better understand migration trends, trade area demographics, and incumbent competition when making site selection opportunities (and thank you to customers like Dave & Buster’s and Chuy’s for highlighting how they are incorporating Placer data into these decisions).
Below, we discuss a few key trends that restaurant operators and their commercial real estate partners should be thinking about as we move into 2024.
Restaurants Ready to Grow Again
Perhaps it shouldn’t be surprising at an event where several restaurant operators were looking to raise capital, but the overarching theme from most management teams that we spoke to this week was that they were ready to accelerate unit expansion plans. Expansion strategies differed by concept, but most operators planned to open new locations across a combination of existing and new markets. With respect to new markets, many operators told us they were prioritizing South and Southeastern markets for new market expansion, echoing what we heard from McDonald’s and others last year. Below, we’ve presented the latest data from Placer’s Migration Trends Report which shows total population changes by market from November 2019-November 2023. Indeed, our data confirms that many South (Phoenix, Texas) and Southeast (Central Florida, Carolinas) markets were among the highest growth populations in the U.S. over the past four years.
That said, with so many restaurant operators targeting these regions, we heard from several executives about the importance of fully understanding the makeup of the markets. Said another way, just because a market has seen meaningful population growth, it doesn’t necessarily mean it’s a candidate for expansion. Below, we’ve presented the same migration map as above (2019-2023 population growth), but with a origin/destination household income filter. A red dot on this map indicates that a market saw the average household income fall because of migration, while a green dot indicates that a market saw an increase in household income. Here, we see a slightly different story, as many higher growth populations actually saw a decline in household income due to migration. We also see the impact of the urban/suburban migration shift that we’ve discussed in the past, with many smaller markets across the Carolinas and Central Florida seeing the highest household income growth versus 2019.
Below, we’ve attempted to bring the two charts together and identify markets that have not only seen population growth but also a significant increase in household income. We see markets like Las Vegas and other areas in Central Florida and the Carolinas region score well using this methodology, but a number of other markets like Boise City, ID, Lakeland, WI, and Spokane, WA also seeing increases in population but also an increase in their average household income.
Most U.S. markets have gone through significant changes post-pandemic both in terms of population size and population makeup. At the end of the day, it's important for restaurants and retailers to not only understand both of these factors when evaluating new markets for growth. We’ve certainly seen success stories–Portillo’s continues to thrive in Texas, for example–but we’ve also seen cases where restaurant openings haven’t been as successful in newer markets because of migration changes.
Eatertainment Demand Remains Strong
We spoke about trends in the eatertainment category last year with the conclusion being that these concepts were still key in driving traffic to commercial properties (despite facing tougher year-over-year comparisons from the great reopening we saw in 2022). There was a palpable sense of optimism among the eatertainment concepts we spoke to at the event, whether they were more focused on entertainment (including Dave & Buster’s, Puttshack, and Pinstripes) or interactive dining (Kura Revolving Sushi Bar or GEN Korean BBQ).
We’ve updated the eatertainment versus casual dining category visit per location analysis we’ve presented in the past below. Although eatertainment’s visit per location outperformance narrowed versus casual dining during Q4 2023, we believe this is a byproduct of seasonality (shift to sit-down dining during the holiday season) and expect the gap to widen once again during Q1 2024.
Most of the eatertainment concepts we spoke to at the ICR conference planned a two-pronged approach to unit expansion in 2024: infilling existing markets and establishing a beachhead in newer markets. Most concepts in this category were planning to grow their store bases by at least double-digit growth rates in 2024, with some like Pinstripes are forecasting 30%+ unit growth this year. Other like Dave & Buster’s are planning to focus on remodeling activity on top of new unit openings to modernize their locations. As demand for eatertainment remains strong among consumers and mall owners, we anticipate that this will remain one of the past growing categories in dining during 2024.
Casual Dining Connecting with Millennials
Casual dining concepts often have a reputation of catering to an older population. However, Darden’s management team called out several demographic trends that should benefit its different brands (including Olive Garden, Longhorn Steakhouse, Cheddar’s, Yardhouse, and others). First, while the percentage of the population in their peak earning years (typically between the ages of 35 and 55) had been on a downward trend for much of the 2000s and part of the 2010s, we’ve seen a reversal of this trend in recent years, which should stimulate demand for full-service dining. Second, the company noted that it over-indexes to millennials. Our data reinforces this, as the potential trade area audience profile by age cohort for Olive Garden (below) indicates a higher percentage of population between the ages of 30-49, encapsulating much of the millennial age range (roughly 27-42 years old today). Last year, we noted that some of the shift to earlier dining times may have been due to changing demographic trends in cities, with an increase in younger families in urban markets needing earlier dining times. Darden's commentary offers further validation of these trends and offers hope for other casual dining chains as this generation cohort continues to enter their peak earning years.
Last year, we noted that some of the shift to earlier dining times may have been due to changing demographic trends in cities, with an increase in younger families in urban markets needing earlier dining times. Darden's commentary offers further validation of these trends and offers hope for other casual dining chains as this generation cohort continues to enter their peak earning years.
2023 was a year that forced restaurant operators to stay agile. Inflation was top-of-mind for most consumers throughout the year, resulting in a trade-down to value-oriented restaurants (or trading out to value grocery chains, dollar stores, and convenience stores). That said, value wasn’t the only factor driving visits, as new menu innovations (Taco Bell was a standout) or marketing partnerships (McDonald’s Famous Orders and “adult” happy meals helping the chain to outperform from a visitation perspective). While we’ve seen visitation trends for the morning daypart improve due to a steady recovery in return to office trends, we continue to see visits during late morning and early afternoon for coffee and QSR chains due to changes in consumer routines (not to mention a resurgence in late night dining). This has also prompted several chains to refine their approach to drive-thrus and pick-up windows (Shake Shack, Chipotle, Taco Bell, among several others). On top of these trends, we’ve seen massive changes in restaurant trade areas, driving many chains to rethink their expansion plans (including an emphasis on South and Southeast, which have seen population growth due to migration).
McDonald’s new exploratory restaurant concept CosMc’s sits at the intersection of several of these trends. The smaller-format (approximately 2,800 square feet, compared to 4,000-4,500 square feet for the average McDonald’s), drive-thru only concept opened its doors last month in Bolingbrook, IL, and is part of a “limited test run”. Its menu heavily focuses on beverages, including four “Signature Galactic Boosts” (featuring Sour Cherry Energy Boost and Island Pick-Me-Up Punch drinks), iced teas and lemonades (such as a Tropical Spiceade and Blackberry Mist Green Tea), slushes and frappes (including a Chai Frappe Burst and Popping Pear Slush), and coffee-based products (highlighted by the S’Mores Cold Brew and Turmeric Spiced Latte). While beverages are the focal point, there are also a variety of breakfast and snack food options, including a Spicy Queso and Creamy Avocado Tomatillo breakfast sandwiches, McPops (filled doughnuts), Savory Hash Brown Bites, and Pretzel Bites. In addition to the experimental fare, the menu also features a host of traditional breakfast sandwiches and beverage offerings.
Given the early buzz, we decided to check out the concept for ourselves this week. It was immediately apparent how much interest CosMc’s was drawing, as the drive-thru lane spanned roughly 80 vehicles upon arrival (which required use of a separate parking lot at the Maple Park Place shopping center, which also features Burlington, Ross Dress for Less, Dollar Tree, Aldi, and Best Buy stores).
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While its unique menu has rightfully generated a significant amount of attention, it’s also clear that McDonald’s is also using CosMc’s as a test for other potential drive-thru only locations in the future. Customers order from dynamic menu boards and cashless payment devices are used to expedite the payment process. Visitors wait at the menu board until their order is ready, and then pickup windows are assigned when the order is ready.
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Admittedly, it’s tough to make definitive conclusions about CosMc’s with the location being open for only a few weeks. Placer’s data suggests that CosMc’s saw more than double the number of visits that a typical McDonald’s saw chainwide during December 2023 (despite being open only since Dec. 7) and more than triple the number of visits per square foot (given CosMc’s smaller, roughly 2,500 square feet footprint). However, it’s also worth noting that CosMc’s visitation numbers would likely have been much higher if the location had additional capacity to satisfy the overwhelming demand.
Still, Placer offers some other ways to evaluate CosMc’s early trends. Based on 2019 Census Block Group data, CosMc’s trade area size (using a 70% of visit threshold) was just over 155 square miles during December 2023 (below). This is roughly 2.5 times the size of the trade area for the average McDonald’s location during December 2023 (62 miles) and significantly larger than the average trade area for most coffee brands (25-35 miles for more urban focused brands to 50-60 miles for more suburban/secondary market brands). In fact, the closest recent comparison we could find for CosMc’s was Raising Cane’s Post Malone and Dallas Cowboys restaurant collaboration, which had an impressive 264-mile trade area during its initial month of opening (though also helped by cross-traffic from Dallas Cowboys home game visitors from across the state of Texas). In some ways, there were also similarities between CosMc's and the Hello Kitty Cafe Trucks, which the Placer.ai Blog team wrote about last September.
Given that McDonald’s also appears to be targeting a younger demographic with CosMc’s, we thought we’d also look at the age breakdown for the potential market trade area (the population living within the trade area for the CosMc’s store). McDonald’s collective potential market trade area largely mirrors U.S. trends given its reach (the company has previously stated that 85% of the population in its top five markets–the U.S., France, the U.K., Germany and Canada–are within three miles of a McDonald’s location), it’s interesting that the potential market trade area for CosMc’s does skew to a younger audience, particularly the 22–29-year-old cohort.
By the end of 2024, McDonald’s plans to open an additional 10 CosMc’s test units, including locations in the Dallas-Fort Worth and San Antonio markets (notably some of the fastest growing markets in the U.S.). Does CosMc’s have the potential to be something more than a 10-unit test over a longer horizon? McDonald's has attempted to differentiate its coffee business in the past with its McCafe menu and standalone McCafe locations in international markets, but competition with Starbucks and others made it difficult for the company to distinguish McCafe as a standalone retail brand in the U.S. CosMc's is interesting from this perspective, as it may allow the company to build a brand more naturally and stand out with a younger audience (which appears to be working). It’s unlikely that future CosMc’s will look or operate like the pilot location in Bolingbrook. Nevertheless, the excitement around new products, an expansive trade area, and potential to connect with younger audience make it a worthwhile test (especially with 2024 shaping up to be a strong year for unit growth within the coffee category).
Key McDonald's Metrics
While focus and streamlined operations are key to restaurant growth strategies, we also continue to see evidence of the impact of innovation and nostalgia in driving visits. McDonald’s has had success with its past celebrity meal collaborations with Travis Scott and J Balvin, with our data indicating a mid-to-high teens lift in visits compared to the weeks prior to the promotion. However, McDonald’s "Adult Happy Meal" collaboration with streetwear brand Cactus Plant Flea Market might be its most successful collaboration today, with data suggesting more than a 30% increase in in-store visitation trends compared to the weeks leading up to the promotion (below). We’ve discussed the impact of limited-time offers (LTO) in the QSR space earlier this year, but McDonald’s has set a new bar for the industry (beating out Taco Bell’s Mexican Pizza launch in May).
Although QSR chains saw more resilient visitation trends than other restaurant categories for much of 2022, the gap between the QSR, fast casual, and full-service restaurant chains had narrowed in September as lower-income consumers continue to face inflationary headwinds from menu price hikes across the QSR space while higher-end consumers continue to dine out. Nevertheless, the impact of McDonald’s adult happy meal promotion is evident in not only the massive spike in visitation trends for the full QSR sector last week (below). While not everyone may love these promotions, they can be an extremely effective way to drive visitation growth.
1. Executive Summary
Five years ago, the neighborhood and lifestyle center playbook was built around apparel anchors, department stores, and soft goods. Today, that model is giving way to a service-first tenant mix centered on health and wellness, food and beverage, fitness, grocery, and off-price retail.
The shift reflects a lasting change in how consumers use physical retail space. The pandemic accelerated demand for health, wellness, and dining; e-commerce continued to erode traditional apparel traffic; and value-oriented and service-based concepts proved more resilient. The result is a new ecosystem in which different tenants take on the roles once filled by the traditional anchor.
Fitness, grocery, and coffee drive frequent visits. Dining extends dwell time and encourages cross-shopping. Wellness captures fast-growing demand that is largely insulated from e-commerce. And off-price retail continues to generate resilient discretionary traffic.
Six years of foot-traffic and tenant-mix data across neighborhood and lifestyle centers point to seven key takeaways for landlords and advisors repositioning their portfolios:
- Apparel has lost its traditional anchor role. Apparel visits fell nearly 25% between 2019 and 2025, while fitness, wellness, coffee, grocery, and off-price / value retail gained traffic.
- The next generation of anchors requires a new approach to tenant evaluation. Landlords should look beyond square footage and traditional anchor status and evaluate tenants based on metrics like visit frequency, traffic growth growth, e-commerce risk, and dwell time – with the strongest mixes combining categories that bring different strengths to the center.
- Neighborhood and lifestyle centers require different ecosystems. Neighborhood centers remain grocery-led and should layer in high-frequency and service-oriented uses. Lifestyle centers are increasingly dining- and experience-led and should optimize for dwell time and destination appeal.
- Fitness, wellness, and food & beverage have emerged as new primary anchors that strengthen centers in different ways. Fitness creates exceptionally frequent, long visits, while wellness brings fast-growing, e-commerce-resistant demand. Dining adds another dimension by extending dwell time and creating destination appeal, particularly at lifestyle centers.
- Off-price is the exception within apparel – and a meaningful opportunity. Ross, Burlington, and the TJX banners continue to grow traffic and store counts even as much of traditional apparel contracts.
- Local trade area considerations should shape the tenant mix. The category framework may hold across markets, but landlords should match specific concepts and banners to the income profile and customer base of the trade area.
2. What Drove the Shift: Three Accelerants
The transformation of the American retail center was driven by three compounding forces that permanently altered consumer behavior and retail economics.
The Pandemic Reset (2020–2021)
COVID-19 permanently altered consumer behavior. Fitness studios, med-spas, and the restaurants that survived captured demand as competitors closed and leaned into digital loyalty programs, while apparel chains lost customers to e-commerce.
The E-Commerce Reckoning (2021–2023)
Offline apparel sales slowed as consumers shifted to digital shopping for traditional fashion. Department stores ceded both sales and market share to off-price for more than a decade, and the pace accelerated after the pandemic. Crucially, many of the categories that held their ground share a common trait: They sell experiences and services that cannot be shipped to a doorstep.
The Wellness Economy Surge (2022–2026)
As the pandemic receded, health and wellness surged. The U.S. med-spa industry reached $17.5 billion by 2022, and was forecast to keep growing at roughly 10 percent a year through 2027. Wellness uses are also among the fastest-growing sources of retail leasing demand.
Strategic Takeaways
- Health, wellness, and food uses gained durable loyalty during the pandemic, while traditional apparel lost it to e-commerce.
- Off-price has been taking share from department stores for over a decade, and the pandemic only accelerated it.
3. The New Anchor Decision Framework
To meet this challenge, centers need to assemble tenant mixes in which different categories perform distinct but complementary roles. Rather than relying on a single dominant anchor, the strongest centers combine tenants that collectively drive frequency, dwell time, growth, and durable physical-world demand. Some generate frequent repeat visits; others contribute fast-growing, e-commerce-resistant demand or resilient discretionary retail traffic.
A. Visit Frequency
Visit frequency is one of the clearest measures of an anchor’s value to its neighbors. A tenant that brings the same customer back every week creates far more exposure for the rest of the center than one that generates occasional destination trips.
And the data reveals a clear hierarchy. Fitness leads by a wide margin, with the average gym visitor returning 4.2 times per month. Coffee follows at 2.5 visits per month and grocery at 2.4, reflecting the routine nature of those categories. Limited-service dining, at 1.9 visits per month, also functions as a meaningful frequency engine.
At the other end of the spectrum are apparel and full-service restaurants, at 1.2 monthly visits per visitor, and spa and wellness, at 1.1. These categories tend to be more purpose-driven than routine-driven.
B. Growth Trends and E-Commerce Risk
But low frequency is not disqualifying. Just as important are a category’s growth trajectory and the durability of its demand in an increasingly e-commerce-driven retail environment.
Spa and wellness chains, for example, rank last in visit frequency at 1.1 average visits per visitor per month. But the category leads all segments in post-pandemic visit growth, up 31.8% since 2019, with effectively no e-commerce exposure.
Off-price follows at 28.6% visit growth, followed by coffee (+26.7%) and fitness (+22.6%) – both of which pair strong growth with high visit frequency and limited digital risk.
C. Dwell Time
Dwell time adds a third dimension: how long customers remain on site. Longer visits, of course, do not automatically translate into cross-shopping, but they increase the opportunity for customers to interact with other tenants and amenities within a center.
Here too fitness stands out, with the largest share of visits lasting 30 minutes or more. Full-service restaurants, off-price retailers, and spa and wellness tenants also perform strongly on this measure, with more than half of visits lasting at least half an hour.
Strategic Takeaways
- Rather than square footage or traditional anchor status, landlords should prioritize a mix of factors that reflect how customers actually interact with tenants.
- Make visit frequency a major input into anchor and tenant-mix decisions.
- Prioritize categories that combine multiple strengths. Fitness, for example, pairs high frequency with strong growth and durable physical demand; grocery combines frequency, stability, and long-term lease commitments.
- Placemaking can help maximize frequency. Shared amenities, walkability, and events give customers a reason to linger and return, compounding the frequency advantage of service and food & beverage (F&B) tenants.
4. Center-Level Trends
Shopping centers have been reshaping their tenant mixes around the categories gaining traffic and leasing demand – but not uniformly. The role each category plays, and the priorities for landlords, differ by format.
A. Lifestyle Centers
Lifestyle centers compete primarily on experience and time-on-site rather than on convenience. And a tenant mix that gives shoppers multiple reasons to come – and to stay – can create a virtuous cycle: Longer visits encourage more cross-shopping, which in turn supports the higher rents commanded by specialty and premium tenants.
Traditionally, the lifestyle-center experience was anchored by dining and apparel, including the department stores that defined the format for decades. As recently as 2019, apparel was the second-largest draw, accounting for 16.2% of visits across the eight categories analyzed below.
But apparel’s pull has weakened. The category’s share of visits fell 3.2 percentage points between 2019 and 2025, dropping behind both limited-service restaurants and grocery. Dining, meanwhile, has become even more central – despite the national headwinds facing full-service restaurants, FSRs’ share of lifestyle-center visits declined by just 1.4 percentage points, leaving them firmly in place as the format’s largest traffic driver. That resilience suggests that the destination dining spots found in lifestyle centers are still doing much of the heavy lifting. Coffee, limited-service restaurants, and grocery all gained visit share over the same period.
Wellness and fitness also posted meaningful gains, as did off-price and value-oriented retailers. Banners such as Nordstrom Rack and Saks OFF 5TH now function as credible affluent-traffic anchors, pairing the appeal of the treasure hunt with access to desirable brands at more approachable prices.
Strategic Takeaways
- Treat the restaurant cluster as the primary anchor, not a secondary amenity.
- Backfill department-store and apparel boxes with wellness, experiential, and premium off-price tenants.
- Match tenant investment with placemaking investment – dwell time only pays off if the center converts it into cross-shopping.
- Investments in placemaking, from plazas and walkable layouts to outdoor dining and programmed community events, can further turn a collection of tenants into a destination, increasing both visit frequency and dwell time across the center.
B. Neighborhood Centers
Neighborhood centers, by contrast, compete on convenience and routine. The winning mix therefore centers on categories that bring the same customer back frequently and reliably.
Traditionally, that routine has been built around the grocery anchor. While grocery’s share of visits has declined modestly since 2019, it still accounted for a majority of visits across the analyzed categories in 2025. With shoppers visiting an average of 2.4 times per month, grocery remains one of the format’s most dependable sources of recurring traffic – and is relatively insulated from e-commerce disruption compared with categories such as apparel.
The more meaningful shift has been in neighborhood centers’ supporting tenant mix. Historically, soft goods, apparel, and bank branches occupied much of the inline space. Today, landlords are increasingly replacing those uses with categories – like fitness – that generate more frequent and durable visitation. Large-format gyms such as Planet Fitness and LA Fitness are increasingly serving as secondary anchors, while spa, wellness, and boutique-fitness concepts fit well into the 2,000–4,000-square-foot inline bays vacated by apparel stores and bank branches.
Restaurants and cafés also remain central. Although their combined share declined slightly, they still represent the second-largest visit driver, accounting for about a third of neighborhood-center visits, with coffee continuing to gain ground. Off-price and value retail, meanwhile, has strengthened its position as a dependable, high-traffic draw.
Strategic Takeaways
- Keep the grocery anchor; surround it with high-frequency, e-commerce-resistant uses that add weekday reasons to visit.
- Right-size vacated apparel and bank bays (2,000–4,000 SF) for spa, boutique fitness, and fast casual.
5. Tailoring the Mix to the Trade Area
The ideal tenant-mix framework is a starting point, but the right execution depends on the characteristics of the local trade area. And one of the clearest differentiators is household income: Brands within the same category often draw from meaningfully different income profiles, making the question not simply whether to add fitness, grocery, dining, or off-price, but which banner best fits the households a center serves.
The data shows a substantial spread. Life Time’s $115.9K trade-area median household income is roughly 51% higher than Planet Fitness’s $76.9K. In off-price, Nordstrom Rack’s $93.9K is about 22% higher than Ross’s $77.1K. And in grocery, Trader Joe’s $92.4K is roughly 20% higher than Kroger’s $77.2K. The category may be right for a center while the wrong banner can still overshoot – or undershoot – the local customer base.
For landlords, that makes trade-area income a useful guide to how premium the mix can go. In higher-income trade areas, the wellness, grocery, F&B, and off-price allocation can skew premium, with concepts such as Life Time, Trader Joe's, chef-driven and experiential dining (for example, True Food Kitchen), and premium off-price (Nordstrom Rack, Saks OFF 5TH). In middle-income and value trade areas, the same categories are better served by large-format value fitness (Planet Fitness, Crunch), mainstream grocery (Kroger), fast-casual and QSR dining, and value off-price (Ross, Burlington). The category framework holds across markets; the specific tenant should be chosen to fit the income profile of the trade area.
Strategic Takeaways
- Trade-area income segments sharply within categories: Premium banners sit in markedly higher-income areas than their value peers.
- Use the ideal-mix framework as a baseline, then tune the specific tenants to the trade area's median income.
6. Strategic Recommendations for Landlords
The neighborhood and lifestyle center model has been fundamentally reinvented. The winning centers of 2026 are built around a service-first ecosystem of health and wellness, food and beverage, grocery, fitness, and off-price retail. Centers that have not begun repositioning face structural risk, and the window for action is the next 36 months.
Immediate Actions (0–12 Months)
- Audit the tenant mix against current visit-mix benchmarks and identify where the center has opportunities to strengthen frequency, dwell time, and cross-shopping.
- Map upcoming lease events and vacancies to the strongest-fit categories and banners. Evaluate fitness, wellness, F&B, grocery, off-price, apparel, and other retail based on the center’s format, trade area, and existing mix.
- Build a fitness and wellness pipeline. Target large-format gyms for suitable anchor or junior-anchor opportunities and boutique fitness, med-spa, and wellness concepts for smaller inline spaces.
- Match F&B opportunities to the center type. Prioritize coffee and limited-service concepts for neighborhood centers and destination dining and upscale fast casual where lifestyle-center positioning supports them.
- Evaluate off-price separately from traditional apparel. Consider value-oriented banners for neighborhood centers and more affluent-oriented off-price concepts for lifestyle centers.
Medium-Term Strategy (1–3 Years)
- Build a wellness ecosystem. Cluster fitness, boutique fitness, and spa and wellness services so they function collectively as a destination rather than as isolated tenants.
- Develop an F&B cluster appropriate to the center. Build restaurant rows or dining districts at lifestyle centers, while strengthening everyday food and beverage at neighborhood centers.
- Layer placemaking onto the strongest clusters. Add outdoor seating, public-realm improvements, gathering spaces, and programming to amplify dwell time and repeat visitation.
- Use grocery as the platform for a broader neighborhood-center ecosystem. Curate adjacent uses that turn recurring grocery trips into longer, multi-purpose visits.
- Establish off-price as a deliberate component of the merchandise mix. Use the right banner for the center’s customer profile and positioning rather than treating all off-price concepts interchangeably.
- Curate categories around complementary trip missions. Over time, create a mix in which grocery drives routine trips, fitness and wellness add frequency and dwell, F&B expands dayparts, and apparel, off-price, and other retail create additional reasons to browse and shop.
For the broker's view on how these traffic patterns translate into leasing decisions, read Cushman & Wakefield's companion piece: The Retail Remix: The New Playbook for Tenant Curation.
Introduction
2024 has been another challenging year for retailers. Still-high prices and an uncertain economic climate led many shoppers to trade down and cut back on unnecessary indulgences. Value took center stage, as cautious consumers sought to stretch their dollars as far as possible.
But price wasn’t the only factor driving consumer behavior in 2024. This past year saw the rise of a variety of retail and dining trends, some seemingly at odds with one another. Shoppers curbed discretionary spending, but made room in their budgets for “essential non-essentials” like gym memberships and other wellness offerings. Consumers placed a high premium on speed and convenience, while at the same time demonstrating a willingness to go out of their way for quality or value finds. And even amidst concern about the economy, shoppers were ready to pony up for specialty items, legacy brands, and fun experiences – as long as they didn’t break the bank.
How did these currents – likely to continue shaping the retail landscape into 2025 – impact leading brands and categories? We dove into the data to find out.
Conventional Value Reaching Its Ceiling
Bifurcation has emerged as a foundational principle in retail over the past few years: Consumers are increasingly gravitating toward either luxury or value offerings and away from the ‘middle.’ Add extended economic uncertainty along with rapid expansions and product diversification from top value-oriented retailers, and you have an explosion of visits in the value lane.
But we are seeing a ceiling to that growth – especially in the discount & dollar store space. Throughout 2023 and the first part of 2024, visits to discount & dollar stores increased steadily. But no category can sustain uninterrupted visit growth forever. Since April 2024, year–over-year (YoY) foot traffic to the segment has begun to slow, with September 2024 showing just a modest 0.8% YoY visit increase.
Discount & dollar stores, which attract lower-income shoppers compared to both grocery stores and superstores, have also begun lagging behind these segments in visit-per-location growth. In Q3, the average number of visits to each discount and dollar store location remained essentially flat compared to 2023 (+0.2%), while visits per location to superstores and grocery stores grew by 2.8% and 1.0%, respectively. As 2024 draws to a close, it is the latter segments, which appeal to shoppers with incomes closer to the nationwide median of $76.1K, which are seeing better YoY performance.
The deceleration doesn’t mean that discount retailers are facing existential risk – discount & dollar stores are still extremely strong and well-positioned with focused offerings that resonate with consumers. The visitation data does suggest, however, that future growth may need to focus on initiatives other large-scale fleet expansions. Some of these efforts will involve moving upmarket (see pOpShelf), some will focus on fleet optimization, and others may include new offerings and channels.
Return of the middle anyone?
Innovative and Disruptive Value Shake Up Retail and Dining
Still, in an environment where consumers have been facing the compounded effects of rising prices, value remains paramount for many shoppers. And brands that have found ways to let customers have their cake and eat it too – enjoy specialty offerings and elevated experiences without breaking the bank – have emerged as major visit winners this year.
Trader Joe’s Drives Visits With Private Label Innovation
Trader Joe’s, in particular, has stood out as one of the leading retail brands for innovative value in 2024, a trend that is expected to continue into 2025.
Trader Joe’s dedicated fan base is positively addicted to the chain’s broad range of high-quality specialty items. But by maintaining a much higher private label mix than most grocers – approximately 80%, compared to an industry average of 25% to 30% – the retailer is also able to keep its pricing competitive. Trader Joe’s cultivates consumer excitement by constantly innovating its product line – there are even websites dedicated to showcasing the chain’s new offerings each season. In turn, Trader Joe’s enjoys much higher visits per square foot than the rest of the grocery category: Over the past twelve months, Trader Joe’s drew a median 56 visits per square foot – compared to 23 for H-E-B, the second-strongest performer.
Chili’s Beats QSR at its Own Game
Casual dining chain Chili’s has also been a standout on the disruptive value front this past year – offering consumers a full-service dining experience at a quick-service price point.
Chili’s launched its Big Smasher Burger on April 29th, 2024, adding the item to its popular ‘3 for Me’ offering, which includes an appetizer, entrée, and drink for just $10.99 – lower than than the average ticket at many quick-service restaurant chains. The innovative promotion, which has been further expanded since, continues to drive impressive visitation trends. With food-away-from-home inflation continuing to decelerate, this strategy of offering deep discounts is likely to continue to be a key story in 2025.
The Convenience Myth
Convenience is king, right?
Well, probably not. If convenience truly were king, visitors would orient themselves to making fewer, longer visits to retailers – to minimize the inconvenience of frequent grocery trips and spend less time on the road. But analyzing the data suggests that, while consumers may want to save time, it is not always their chief concern.
Looking at the superstore and grocery segments (among others) reveals that the proportion of visitors spending under 30 minutes at the grocery store is actually increasing – from 73.3% in Q3 2019 to 76.6% in Q3 2024. This indicates that shoppers are increasingly willing to make shorter trips to the store to pick up just a few items.
At the same time, more consumers than ever are willing to travel farther to visit specialty grocery chains in the search of specific products that make the visit worthwhile.
Cross visitation between chains is also increasing – suggesting that shoppers are willing to make multiple trips to find the products they want – at the right price point. Between Q3 2023 and Q3 2024, the share of traditional grocery store visitors who also visited a Costco at least three times during the quarter grew across chains.
Does this mean convenience doesn’t matter? Of course not. Does it indicate that value, quality and a love of specific products are becoming just as, if not more, important to shoppers? Yes.
The implications here are very significant. If consumers are willing to go out of their way for the right products at the right price points – even at the expense of convenience – then the retailers able to leverage these ‘visit drivers’ will be best positioned to grow their reach considerably. The willingness of consumers to forego convenience considerations when the incentives are right also reinforces the ever-growing importance of the in-store experience.
So while convenience may still be within the royal family, the role of king is up for grabs.
Serving Diners Quicker With Automatization
Chipotle Draws Crowds With Autocado
Convenience may not be everything, but the drive for quicker service has emerged as more important than ever in the restaurant space. Diners want their fast food… well, as fast as possible. And to meet this demand, quick-service restaurants (QSRs) and fast-casual chains have been integrating more technology into their operations. Chipotle has been a leader in this regard, unveiling the “Autocado” robot at a Huntington Beach, California location last month. The robot can peel, pit, and chop avocados in record time, a major benefit for the Tex-Mex chain.
And the Autocado seems to be paying off. The Huntington Beach location drew 10.0% more visits compared to the average Chipotle location in the Los Angeles-Long Beach-Anaheim metro area in Q3 2024. Visitors are visiting more frequently and getting their food more quickly – 43.9% of visits at this location lasted 10 minutes or less, compared to 37.5% at other stores in the CBSA.
Are diners flocking to this Chipotle location to watch the future of avocado chopping in action, or are they enticed by shorter wait times? Time will tell. But with workers able to focus on other aspects of food preparation and customer service, the innovation appears to be resonating with diners.
McDonald’s Leans into Automation in Texas
McDonald’s, too, has leaned into new technologies to streamline its service. The chain debuted its first (almost) fully automated, takeaway-only restaurant in White Settlement, TX in 2022 – where orders are placed at kiosks or on app, and then delivered to customers by robots. (The food is still prepared by humans.) Unsurprisingly, the restaurant drives faster visits than other local McDonald’s locations – in Q3 2023, 79.7% of visits to the chain lasted less than 10 minutes, compared to 68.5% for other McDonald’s in the Dallas-Fort Worth-Arlington, TX CBSA. But crucially, the automated location is also busier than other area McDonald’s, garnering 16.8% more visits in Q3 than the chain’s CBSA-wide average. And the location draws a higher share of late-night visits than other area McDonald’s – customers on the hunt for a late-night snack might be drawn to a restaurant that offers quick, interaction-free service.
Evolving Retail Formats - Finding the Right Fit
Changing store formats is another key trend shaping retail in 2024. Whether by reducing box sizes to cut costs, make stores more accessible, or serve smaller growth markets – or by going big with one-stop shops, retailers are reimagining store design. And the moves are resonating with consumers, driving visits while at the same improving efficiency.
Macy’s Draws Local Weekday Visitors With Small-Format Stores
Macy’s, Inc. is one retailer that is leading the small-format charge this year. In February 2024, Macy’s announced its “Bold New Chapter” – a turnaround plan including the downsizing of its traditional eponymous department store fleet and a pivot towards smaller-format Macy’s locations. Macy’s has also continued to expand its highly-curated, small-format Bloomie’s concept, which features a mix of established and trendy pop-up brands tailored to local preferences.
And the data shows that this shift towards small format may be helping Macy’s drive visits with more accessible and targeted offerings that consumers can enjoy as they go about their daily routines: In Q3 2024, Macy’s small-format stores drew a higher share of weekday visitors and of local customers (i.e. those coming from less than seven miles away) than Macy’s traditional stores.
Harbor Freight Tools and Ace Hardware Serve Smaller Growth Markets With Less Square Footage
Small-format stores are also making inroads in the home improvement category. The past few years have seen consumers across the U.S. migrating to smaller suburban and rural markets – and retailers like Harbor Freight Tools and Ace Hardware are harnessing their small-format advantage to accommodate these customers while keeping costs low.
Harbor Freight tools and Ace Hardware’s trade areas have a high degree of overlap with some of the highest growth markets in the U.S., many of which have populations under 200K. And while it can be difficult to justify opening a Home Depot or Lowe’s in these hubs – both chains average more than 100,000 square feet per store – Harbor Freight Tools and Ace Hardware’s smaller boxes, generally under 20,000 square feet, are a perfect fit.
This has allowed both chains to tap into the smaller markets which are attracting growing shares of the population. And so while Home Depot and Lowe’s have seen moderate visits declines on a YoY basis, Harbor Freight and Ace Hardware have seen consistent YoY visit boosts since Q1 2024 – outperforming the wider category since early 2023.
Hy-Vee Bucks the Trend by Going Big
Are smaller stores a better bet across the board? At the end of the day, the success of smaller-format stores depends largely on the category. For retail segments that have seen visit trends slow since the pandemic – home furnishings and consumer electronics, for example – smaller-format stores offer brands a more economical way to serve their customers. Retailers have also used smaller-format stores to better curate their merchandise assortments for their most loyal customers, helping to drive improved visit frequency.
That said, a handful of retailers, such as Hy-Vee, have recently bucked the trend of smaller-format stores. These large-format stores are often designed as destination locations – Hy-Vee’s larger-format locations usually offer a full suite of amenities beyond groceries, such as a food hall, eyewear kiosk, beauty department, and candy shop. Rather than focusing on smaller markets, these stores aim to attract visitors from surrounding areas.
Visit data for Hy-Vee’s large-format store in Gretna, Nebraska indicates that this location sees a higher percentage of weekend visits than other area locations – 37.7% compared to 33.1% for the chain’s Omaha CBSA average – as well as more visits lasting over 30 minutes (32.9% compared to 21.9% for the metro area as a whole). For these shoppers, large-format, one-stop shops offer a convenient – and perhaps more exciting – alternative to traditionally sized grocery stores. The success of the large-format stores is another sign that though convenience isn’t everything in 2024, it certainly resonates – especially when paired with added-value offerings.
A Resurgence of Legacy Brands
Many retail brands have entrenched themselves in American culture and become an extension of consumers' identities. And while some of these previously ubiquitous brands have disappeared over the years as the retail industry evolved, others have transformed to keep pace with changing consumer needs – and some have even come back from the brink of extinction. And the quest for value notwithstanding, 2024 has also seen the resurgence of many of these (decidedly non-off-price) legacy brands.
In apparel specifically, Gap and Abercrombie & Fitch – two brands that dominated the cultural zeitgeist of the 1990s and early 2000s before seeing their popularity decline somewhat in the late aughts and 2010s – may be staging a comeback. Bed Bath & Beyond, a leader in the home goods category, is also making a play at returning to physical retail through partnerships.
Anthropologie, another legacy player in women’s fashion and home goods, is also on the rise. Anthropologie’s distinctive aesthetic resonates deeply with consumers – especially women millennials aged 30 to 45. And by capturing the hearts of its customers, the retailer stands as a beacon for retailers that can hedge against promotional activity and still drive foot traffic growth.
And visits to the chain have been rising steadily. In Q4 2023, the chain experienced a bigger holiday season foot traffic spike than pre-pandemic, drawing more overall visits than in Q4 2019. And in Q3 2024, visits were higher than in Q3 2023.
Meeting the Evolving Needs of Millennials
And speaking of the 35 to 40 set – the generation that all retailers are courting? Millennials. Does that sound familiar? Yes, because this is the same generational cohort that retailers tried to target a decade ago. As millennials have aged into the family-formation stage of life, their retail needs have evolved, and the industry is now primed to meet them.
Sam’s Club Draws Value-Conscious Singles and Starters
From the revival of nostalgic brands like the Limited Too launch at Kohl’s to warehouse clubs expanding memberships to younger consumers as they move to suburban and rural communities, there are myriad examples of retailers reaching out to this cohort. And Sam’s Club offers a prime example of this trend.
Over the past few years, millennials and Gen-Zers have emerged as major drivers of membership growth at Sam’s Club, drawn to the retailer’s value offerings and digital upgrades – like the club’s Scan & Go technology. Over the same period, Sam’s Club has grown the share of “Singles and Starters” households in its captured market from 6% above the national benchmark in Q3 2019 to 15% in Q3 2024. And with plans to involve customers in co-creating products for its private-label brand, Sam’s Club may continue to grow its market share among this value-conscious – but also discerning and optimistic – demographic.
Taco Bell Brings in Crowds With Value Nostalgia Menu
Millennials are also now old enough to wax nostalgic about their youth – and brands are paying attention. This summer, Taco Bell leaned into nostalgia with a promotion bringing back iconic menu items from the 60s, 70s, 80s, and 90s – all priced under $3. The promotion, which soft-launched at three Southern California locations in August, was so successful that the company is now offering the specials nationwide. The three locations that trialed the “Decades Menu” saw significant boosts in visits during the promotional period compared to their daily averages for August. And people came from far and wide to sample the offerings – with a higher proportion of visitors traveling over seven miles to reach the stores while the items were available.
What Lies Ahead?
Hot on the heels of a tumultuous 2023, 2024’s retail environment has certainly kept retailers on their toes. While embracing innovative value has helped some chains thrive, other previously ascendant value segments, including discount & dollar stores, may have reached their growth ceilings. Consumers clearly care about convenience – but are willing to make multiple grocery stops to find what they need. At the same time, legacy brands are plotting their comeback, while others are harnessing the power of nostalgia to drive millennials – and other consumers – through their doors.
