Spotlight on dark kitchens

Kitopi is one of many food delivery providers to operate dark kitchens offshore.

Cafes and restaurants start ups, or those seeking to increase output since the COVID led rise in home delivery – are driving leasing demand for warehouses able to fit as dark kitchens – a low-cost alternative to a venue with dining spaces.

Some of these nondescript buildings service between 20-30 hospitality brands, CBRE said in a new research report, Australian Online Meal Delivery and Dark Kitchens.

“These operations were already in focus given the growth in average household income and changing consumer habits, which has been driving demand for readymade, delivered meals in Australia – translating to an average annual market growth of 76 per cent over the past five years, with revenue expectations of approximately $872 million this year and over $1 billion in 2021,” Kate Bailey, CBRE head of Logistics and Retail Research, Australia, report author, added.

“Interest has been accelerated by COVID-19 as hospitality retailers and landlords look at new ways of delivering products and services,” the executive said adding “dark kitchens were becoming increasingly popular worldwide, as shared spaces used for the preparation and distribution of online food delivery orders from services such as Deliveroo and Uber EATS”.

The benefits, the analyst said, include “a greater market reach (and increased revenue) for food providers and more options for consumers”.

“Another key advantage of dark kitchens, where offered by delivery service providers such as Deliveroo, is the absence of rental fees – or where rental fees apply, running costs are minimised via monthly rental agreements, as opposed to multi-year lease terms,” Ms Bailey said.

“While some contracts offer a potentially rent-free use of dark kitchens, delivery service providers are known to instead take a larger percentage of each sale that comes out of the dark kitchen”.

Other benefits, for hospitality retailers, include being able to access consumer preferences and information from delivery service providers and market-test locales before, possibly, signing up for a traditional lease.

Leif Olson, CBRE’s national Retail Leasing director, added dark kitchens were either provided and managed by the delivery service provider or internally setup and managed by the restaurateurs themselves.

“An increasingly popular strategy for dark kitchen providers is to fit-out an array of 20 foot containers with commercial kitchen equipment – positioned on a central, inner-city site – to allow for a faster, lower-cost alternative to traditional commercial kitchen setups; it is also more scalable, versatile and easily deployable on vacant land.

“This is a great addition to traditional bricks and mortar hospitality offerings, where it’s important restauranteurs are able to curate signature dining experiences – it’s a low-cost rental option that takes pressure off the bottom line and enables food providers to put product in front of a wider customer pool.”

Global providers include Karma Kitchen, CloudKitchens and Kitopi, with locations in America, Europe and Asia – while Deliveroo is the only multinational provider in Australia, with over 250 dark kitchens at approximately 35 locations globally, Mr Olson added.

A local example of a dark kitchen is the Deliveroo site in Windsor, Victoria.

“Opened in 2017, in an alleyway behind Chapel Street, the site has been, or is currently being, used by restaurants such as Kong, Messina, 8Bit and more.

“The site, which includes two full-scale professional kitchens and a large waiting room with phone chargers and an order display screen for Deliveroo’s riders, was built and fitted out by Deliveroo, then leased free-of-charge to restaurants and other brands – with brands pay nothing upfront, but Deliveroo charging a higher commission fee on orders placed through the Deliveroo app”.

In 2018, it multiplied by five the amount of space it tenants in the city – renting a Collingwood building able to service about 280,000 people in Melbourne’s inner north east.

Last April Deliveroo confirmed it would open a dark kitchen in Sydney’s Verieu Hotel in Ultimo.

Several months ago a Brunswick property at 2-6 Pitt Street was rented and has become a dark kitchen occupied by retailers servicing Melbourne’s inner north.

The meal delivery economy has been growing for some time but is thriving this year.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco