Kitchen Incubators Cook Up CRE Opportunities
The combination of foodies and budding entrepreneurs is creating a perfect recipe for a burgeoning market of commercial kitchens.
Results of a new study show that there has been a surge in kitchen incubators or shared commercial kitchen space in the past three years. Since August 2013, the number of kitchen incubators in the U.S. increased by 50% to more than 200 facilities, according to a survey conducted by Econsult Solutions Inc. (ESI) and American Communities Trust and Urbane Development. The survey found kitchen incubators operating in nearly 40 states across the country with locations concentrated primarily in urban areas.
Kitchen incubators are an affordable solution for users who would otherwise face a hefty cost related to building out their own commercial kitchen. On top of the expense of equipment and infrastructure such as plumbing and ventilation systems, there are significant regulatory and licensing hurdles related to commercial food prep. Entrepreneurs, personal chefs, and bakers that are just getting their start often don’t have the capital – or the credit – to buy a facility or lease that type of space. In addition, start-ups may not have a full-time need for the space. So, sharing the space and the cost may be the way to go.
That sharing concept fits with the broader trend where people are sharing everything from cars and bikes to apartments. In real estate, turning excess space into a money maker has been a success for the likes of Airbnb and Liquid Space. So, could turning an under-utilized space into a commercial kitchen be a new revenue source for building owners and managers?
Potentially, it could be an outside-the-box solution for properties that are looking for an adaptive re-use, especially if the owner is able to convert an existing restaurant or food-service space that already has equipment or infrastructure in place. More than half, 61%, of the incubators surveyed are for-profit, while 20% are USDA-certified and 40% have partnerships with outside organizations. In most cases, space is rented in incremental blocks of time in order to commercially produce food products. Some incubators also have a co-op format with members or tenants.
B-More Kitchen is a new incubator for small-scale food producers located in a former Chevrolet dealership in Baltimore that is set to open this summer. B-More recently announced its first few tenants, which include Bottoms Up Bagels, Pie Time, Trisha's Almond Toffee and Wholesome Nibbles among others. At full capacity, the incubator expects to have room for 50 to 60 members.
Finley’s Market in Cincinnati launched its own non-profit commercial kitchen last year. The 8,000-square-foot Findlay Kitchen is a shared-use, licensed kitchen that aims to support new and existing food entrepreneurs who are just starting out or looking to scale-up their business operation. Findlay rents space to users for cooking, classes and special events, as well as offering mentoring programs to help support those new business ventures.
According to a recent NAIOP blog, there also are online listing services that are tapping into that growing demand for highly specialized space. Culinary Incubator and CommercialKitchenForRent.com are among those sites that offer a searchable database of commercial kitchen rentals, shared spaces and co-op kitchens. For example, Culinary Incubator claims to have nearly 660 shared kitchens listed in its national database.
It may be too soon to tell whether kitchen incubators have staying power, or might be little more than a flash in the pan. But, some of the early industry data certainly suggests this sector has more appetite for growth.