If anything, Covid-19 increased the popularity of the drive thru market. It’s not that long ago since the post-lockdown period when restaurants were closed, but drive thru lanes were open, leading to huge queues of customers, causing traffic chaos but supporting businesses during challenging times.

Appetite for quick, self-service food continues to be strong, accelerating many established operators’ acquisition programmes, including McDonalds, KFC, Burger King, Costa, and Starbucks. There are new entrants to these markets, including Tim Hortons, Wendys and Popeyes, while some established operators such as Greggs and Subway have also started new drive thru concepts.

Montagu Evans has been involved in over 50 rent reviews, regears or lease renewals for landlords in the last three years. We have achieved average rental growth of c25% in the last 5-year rent review cycles, but up to 95% in specific circumstances. On regears and lease renewals tenants are keen to extend their leases at rental increases and minimum incentives. 

There are multiple examples of new lettings between £70-£80psf on smaller units of 1,800sqft, and a rent of over £250,000 per annum has been achieved on a letting of a larger drive thru of over 3,500 sq ft. Acting on behalf of one of our landlords in Slough we achieved a headline rent of £95 psf on a drive thru letting to Greggs in competitive bidding.

Costa and Starbucks have been the most acquisitive of the operators, mainly taking smaller units of around 1,800 sq ft. Because of their smaller size and lack of expensive kitchen equipment, they are paying some of the highest rents per square foot. 

The growth of the drive thru market is also down to the growth of home delivery, where Uber Eats and Deliveroo are a conduit to additional revenue. Most home delivery goes through the existing restaurants and can increase turnover by up to 50%, especially in densely populated catchments where customers prefer not to drive.

But it is not only strong tenant demand that has led to rental growth in recent years. There is a lack of new opportunities, challenges in securing planning permission and an increase in building costs which has led to landlords requiring higher rents. 

Nevertheless, drive thrus are an important addition to retail parks and other out of town locations. With the right approach, they remain attractive to occupiers, providing additional income streams on a relatively small footprint and bringing greater diversity to the tenant mix.