When Will Travel Return To Normal?

Video Index:
0:00 I went back to Disneyland
0:49 Recent closing: Los Compadres Plaza property sold for $8.8M
1:40 How the travel industry is doing in 2021
3:00 The growing industry of ghost kitchens
4:55 Employment market & August job report

Hello, Investors!

I’m Mike Lin, and I’m a commercial real estate broker based in Southern California.  I help owners of retail properties determine the value of their real estate and help to sell them for top dollar. And I make these YouTube videos to keep you updated on what’s happening in commercial real estate, the retail industry, the overall economy, and the state of California.

I hope you had a great Labor Day.  Last weekend, my family and I went back to Disneyland for the first time in a year and a half!

I’m a sucker and I bought one of Disney’s new Magic Key passes, which is their new version of the annual pass program. It was a really warm day, but we got to enjoy a few of the rides,before it got too hot for the kids.  There are a few differences now, like no marching band parades, and you can’t meet the characters up close – only from a distance.



Even Mickey is afraid of the Delta variant.

Recent Closing: Los Compadres Plaza


Today’s email is brought to you by Los Compadres Plaza, a 30-tenant office and retail property that I closed escrow on last week for $8.8 million dollars. My partners Brad Umansky, Greg Bedell and I represented the Seller.  This property was quite management intensive for the Seller, and he will be exchanging into several single tenant properties where he will be able to just sit back and collect a check every month.

If this sounds like a good deal to you, give me a call and I can help you to do the same. In many cases, it makes sense to sell your management-intensive center and trade into something else that takes a lot less effort to own.  The first step in getting started is with a property valuation, which I can do for you, free of charge. Reply to this email and I’ll be glad to help.

How the travel industry is doing in 2021

Hospitality research firm STR recently released a report that has upgraded their forecast for 2021 hotel occupancy.  Hotel room rates hit an all-time high this past summer, and STR predicts that leisure travel will end this year 17% higher than in 2019, and that full recovery of travel demand will occur in 2023. STR does have a concern that once summer is over, travel will drop again.  They predict that most businesses will wait until 2022 to put their employees back on the road.  The Delta variant has sure put a hold on many businesses’ travel plans.

A study by Bloomberg indicates that while business travelers account for only 12% of the seats on any given flight, they account for as much as 75% of the airlines’ profits.  So for business travel to be so significantly cut back has really hurt the airline industry.

The retail industry’s big convention formerly called ICSC ReCon, which has now been rebranded as “Here, We Go,” is scheduled for December 5th in Las Vegas.

The growing industry of ghost kitchens

When the pandemic came, many businesses closed, and restaurants were hit especially hard.  Many had to change their business models to survive, and had to ramp up their ability to provide enough meals for customers for pick up or delivery through services like Postmates, Doordash, or Grubhub.

That’s where ghost kitchens have been playing a key, behind the scenes role for the restaurant industry. Ghost kitchens are facilities that just prepare food for takeout or delivery. They can be housed in areas where rent is less than in a traditional shopping center retail space. In addition, they don’t need to worry about hiring waiters, buying dishes, or washing dishes.

Recently, Wendy’s announced that they will open 700 ghost kitchens across US and UK by 2025 through a partnership with the largest Ghost Kitchen brand, Reef Kitchens, which recently raised $700MM in capital. Reef typically operates their kitchens out of trailers that are parked in a parking lot of a shopping center.

And to further show that this concept is going mainstream, you’ll soon be able to find ghost kitchens at Walmart and Ralphs!  Walmart has partnered with a Canadian Ghost Kitchen company called, Ghost Kitchens, and they have opened a virtual food court in a Walmart store in Rochester, N.Y. Walmart plans to open more in stores in Texas, California, Illinois and Georgia over the next year.

The way it works is that there is a kiosk in the store that allows shoppers to order from a slimmed down menu from 25 national and regional restaurants, including Cheesecake Factory, Dickey’s Barbecue, Quiznos, and even Shaq’s Big Chicken.

And the cool part is that you can combine them into one order.  All the food is prepared on site in the kitchen in Walmart. And when the food is ready, you’ll get a text and you can go pick it up.

Ralphs is doing a similar concept with a different ghost kitchen company, and they plan to open a ghost kitchen in a Ralphs in Los Angeles later this fall.

Now that restaurants are mostly back to allowing indoor dining, many patrons still aren’t comfortable eating indoors and are still preferring to get takeout or delivery. COVID has changed the way we work and dine, so ghost kitchens may be here to stay.

Employment market and August’s job report

The August jobs report came out last week and it was a pretty big disappointment. There were only 235,000 new hires in August, when economists had predicted 720,000 new hires.

These numbers are the worst since January, and have caused the Federal Reserve to consider reducing stimulus to encourage people to work. Two of the worst-performing sectors were leisure and hospitality, which added zero jobs, and retail trade, which lost 28,000 jobs.

Daniel Zhao, a senior economist at the jobs site Glassdoor.com, summarized the situation well when said “Ultimately the Delta variant wave is a harsh reminder that the pandemic is still in the driver’s seat, and it controls our economic future.”  But the truth is, many people don’t want to work, whether it’s due to the government stimulus, fear of getting sick, or for lack of child care.

But there was some good news in the report.

The unemployment rate fell, from 5.4% to 5.2%.  Business services such as legal services, accounting, bookkeeping, and other professional services added approximately 74,000 jobs last month.
Transportation and warehousing grew in August with 53,200 new jobs. Manufacturers had a good month in which they made 37,000, many from automotive companies. I really hope this is an indicator that our supply of cars will return to normal soon!

Well, that’s all I’ve got for this week.  I hope you learned something today!  Thanks for reading.


Connect with me here:
Website:  https://mikelincre.com
YouTube: https://www.youtube.com/MikeLinCRE
LinkedIn: https://www.linkedin.com/in/MikeLinCRE
Twitter: https://twitter.com/MikeLinCRE
Email: mike@progressiverep.com

Mike Lin, CRE