What does the rise of ghost kitchens tell us about the future of real estate?

by | Jul 16, 2021

photo of a kitchen

By Stephen Hayes, Head of Global Property Securities at First Sentier Investors

The hospitality industry is facing disruption from a new consumer trend driving an uprise of ‘ghost kitchens’. The rapid growth of this new type of property provides some useful lessons about investing in real estate over the long term.

What is a ghost kitchen?  

The ghost kitchen is a purpose-built industrial kitchen, designed to produce and distribute food to delivery drivers more efficiently than a traditional restaurant. They boast optimised workspaces designed to meet peak hour demand and substitute a dining room area with a digital storefront, providing a seamless fulfilment and logistics experience.

The location of such kitchens is key to their success. In order to deliver fresh, hot meals quickly, they need to be in areas where both demand and population density are high, making them suitable for urban infill industrial sites.

A stellar growth trajectory

By September 2020, there were already around 7,500 ghost kitchens in China, 3,500 in India, 1,500 in the United States and 750 in the UK.

Underpinned by the movement toward a digitally integrated world, online food delivery in the US, predicted to reach US$490 billion by 2025, grew more than 300% faster than dine-in over the last five years.

Euromonitor International says global delivery sales more than doubled from 2014 to 2019 – and that was before COVID saw millions of dining spaces forced to close and move to delivery only.

The food delivery boom and the ghost kitchens it has spawned are now providing a lifeline for many vendors who struggled with pandemic lockdowns, allowing them to operate on lower lease models rather than on prime strips of real estate with street frontage.

Lessons in disruption 

With an abundance of interest in the sector, it is no surprise that a number of companies and investors are active in this niche. While this type of asset is still just a fraction of global commercial real estate, it’s a useful case study in how fast a disruptive force can change the demand and supply dynamics of property.

In particular, the ghost kitchen trend has demonstrated that:

  • Disruption can come from anywhere

Some five years ago, we caught taxis and ordered home delivery from local takeaways. In 2021, rideshare is ubiquitous and we can eat 5-star meals on our couch.

The growth of online prepared food delivery and the increasing popularity of ghost kitchens exemplifies how disruption to the restaurant sector can affect real estate. We have seen over the last decade how retail property (such as malls and shopping strips) have faced a strong disruptive force due to e-commerce.  Now, we are seeing how urban infill industrial property could benefit from ghost kitchen demand driving up market rents and land values. As the institutionalisation of the ghost kitchen industry continues, we expect the size and scalability of the assets to grow alongside it.

  • Disruption sits within societal megatrends

The food delivery boom is just one part of a change in the way we live. Digital transformation, cost cutting through operational efficiency, scalability, and Covid safety are just some of the macro themes that have contributed to the rise of this sector.

Consumers want convenience and a seamless digital experience in every facet of their lives. In the same way that industrial warehouses have experienced a renaissance thanks to e-commerce, ghost kitchens demonstrate how social change can drive a rethink in real estate investment.

  • Competition doesn’t wait

After Uber co-founder Travis Kalanick exited his executive role at the company that disrupted the taxi business, he launched CloudKitchens. With a US$400m injection from an investment fund, the company is buying cheap real estate to build shared kitchens for restaurants in the United States, China, India and the UK.

Asia is leading the way. Ghost kitchens are increasingly being built there and the adoption rates of online delivery and ordering technology have proven to be superior. For example, Yum China, China’s franchisor of KFC and Pizza Hut, has 300 million people signed up to its online rewards program which serves as a foundation for it to grow a national delivery network. It’s aiming for 20,000 ghost kitchens located in mainland China, with 1,000 kitchens planned for 2021.


The continued adoption of technology is leading to rapid societal change in regard to how we live, work and play. These changes are leading to large reallocations of capital across global economies with real estate being a major beneficiary. Society’s adoption of the convenience of home delivered meals, and the subsequent increases in ghost kitchen demand, is leading increased investment in real estate in the new age economy.

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