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GREATER LOS ANGELES MARKETFLASH
Ghost Kitchens Are Breathing New Life Into LA's Restaurant Scene
MAY 12, 2021

•Ghost Kitchens were among the most active retail occupiers in the Greater Los Angeles during the pandemic, adding dozens of locations across the region as consumers pivoted to online ordering.

•In the GLA region, over 50,000 square feet of commercial real estate have been leased by Ghost Kitchen operators since 2020.

•About 111 million people in the U.S. utilized an online ordering app for food in 2020—a 17% increase from the year before. Online food ordering app revenue is expected to increase 62% by 2025.

•The COVID-19 pandemic has supercharged demand for Ghost Kitchens. The Ghost Kitchen market share of total restaurant sales in the U.S. is expected to reach 21% within the next four years.

•Ghost Kitchens have diversified and taken on various subtypes to meet consumer and business demands.


The emergence of new technologies, coupled with a rise in consumer demand, led in recent years to the  creation of a new type of restaurant concept—the Ghost Kitchen—a commercial kitchen space absent of traditional dine-in amenities and existing for the sole purpose of fulfilling the ever-growing deluge of online orders. While initially small in number and concentrated in dense urban centers, the COVID-19 pandemic thrust Ghost Kitchens into the spotlight as a viable means for restaurants to reach their customers during lockdown. As of the end of 2020, over 1,500 such facilities were located in the U.S., according to Restaurant Dive. While the retail sector and especially dine-in restaurants have been severely impacted by the pandemic; Ghost Kitchens have been among the most active retail tenants in the Greater Los Angeles (GLA) market throughout 2020.

Ghost Kitchens were one of the most active retail industries during the pandemic, leading to a rapid spread of them across the GLA region.
Source: CBRE Research, 2021.

With dine-in options unavailable most of last year due to social distancing guidelines, many restaurant goers turned to online ordering as an alternative. In 2020, over 111 million people used an online ordering app—a 17% increase from the year prior.¹ Tech companies and app makers that help facilitate online ordering, such as Doordash, Uber Eats, Postmates, are well positioned to reap the benefits of the shift in consumer habits. Online ordering from these apps totaled $26.5 billion in 2020—an 18% jump from the year before—and is projected to climb another 62% by 2025.²

As consumers become more comfortable with online food ordering, the share of Ghost Kitchens is expected to climb. Pre-pandemic, Ghost Kitchens were expected to account for 10% to 15% of the market share by 2025, according to Statista. But due to increased consumer adoption of online ordering, the market share is now expected to climb to 20-25%.

Growth for Ghost Kitchens was expected to be moderate--but COVID-19 changed all that with market share expectation for the segment now at 21% of the U.S. restaurant market by 2025.
(1) Data aggregated and sourced by Business Apps, Statista, McKinsey, and Morgan Stanley.
(2) Data aggregated and sourced by Business Apps, Research & Markets, IMARC Group.

Source: Statista; CBRE Research, 2021.

As Ghost Kitchens have expanded amid the pandemic, this emerging segment continues to evolve. As of 2021, other types have emerged to satisfy the needs of different businesses. “Pure Play” Kitchens are what many have come to expect of a commercial kitchen space—a place where restaurants can lease a small amount of space to help fulfill online orders. But variants have emerged—such as those operators that don’t lease out their space and instead cultivate their own in-house brands.

In just a short amount of time, Ghost Kitchens have diversified beyond their commercial kitchen roots.
Source: CBRE Research, 2021.

The Greater Los Angeles (GLA) region has been one of the most active markets in the Ghost Kitchen space, with heavy hitters such as Kitchen United and Cloud Kitchens having taken up residence in the region in 2019. Since then, dozens of commercial kitchen spaces of varying types have cropped up in the region. Though harder to track than traditional restaurants, CBRE Research has identified a handful of operators that have been active in the market over the last twelve months. It is estimated that Ghost Kitchens have taken roughly 50,000 square feet of space in the GLA region since 2020.

Though small in footprint, Ghost Kitchens have outpaced most other established retailers in adding new space between 2020 and 2021.
(3) Based on available data. Size is approximate.
Source: CoStar; CBRE Research, 2021.
Contacts
Eric Willett
Research Director
CBRE Pacific Southwest Thought Leadership
+1 213 613 3274
eric.willett@cbre.com | LinkedIn
Dan Hunker
Research Analyst
CBRE Pacific Southwest Thought Leadership
+1 909 418 2117
dan.hunker@cbre.com | LinkedIn

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