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The Drive-Thru Dilemma: Balancing Traffic Flow, Community Aesthetics, and Profitability

By LRE Companies,

Few types of commercial real estate cause as much friction—both physical and metaphorical—as the drive-thru lane. For developers and municipalities, it represents a challenge at the crossroads of three key priorities: maintaining efficient vehicle flow, preserving neighborhood character, and safeguarding the financial stability of quick-service restaurant (QSR) properties, which are among the most resilient net-lease investments. Incorrectly balancing these factors can lead to lost sales, community resistance, and permitting delays. Conversely, precise site planning is crucial to achieving the right balance and ensuring success.

Why the Drive-Thru Still Drives the Deal

The drive-thru remains the core revenue source for QSR. Industry data indicates that drive-thru orders make up more than half of all transactions across QSR and fast-casual brands nationwide. In suburban and busy area markets, this share exceeds 60 percent—especially in many western U.S. growth corridors where LRE & Companies operates. During the pandemic, some chains saw a drive-thru dependence rise from about 60 percent to as high as 70 or 80 percent of total sales, a level that has mostly persisted, not reversed. This reliance is a double-edged sword. When functioning well, the drive-thru is the most efficient revenue generator on site. When it falters, the impact is swift: industry-wide, average service time is around five and a half minutes, order accuracy has dropped to roughly 87 percent, and drive-thru traffic has declined by 5 to 8 percent year-over-year as digital ordering, delivery, and takeout take more share. Slower, less accurate lanes lead to abandoned queues, resulting in lost sales that aren’t reflected in the P&L until the quarter ends.

The Traffic Flow Problem

Single-lane, single-window drive-thrus were designed for lower traffic volumes. Today’s demand, peak kitchen output of about 150 orders per hour at top-performing locations, has led operators and developers to adopt multi-lane setups, dedicated mobile-order pickup lanes, and express lanes for app-based orders. For developers, this isn’t merely an aesthetic update; it’s a strategic site-plan choice affecting stacking depth, curb cuts, parking ratios, and how a pad site connects with the shared access drive of a larger retail or restaurant complex.

Undersized stacking remains one of the most frequent—and costly—errors in QSR site planning. A lane that backs into a parking lot or, worse, onto a public right-of-way, not only frustrates customers but also attracts scrutiny from planning authorities and risks delaying approval for other tenants sharing the same site. Accurately estimating stacking needs during the entitlement process, before pouring concrete, is much more cost-effective than retrofitting a lane after a traffic complaint is filed.

Community Aesthetics: The Entitlement Reality

Across the western U.S., municipalities increasingly view drive-thru approvals as a negotiation rather than a mere formality. Conditions such as screening walls, enhanced landscaping, articulated building facades, and noise control for order-point speakers are now common in many areas, especially in communities that previously opposed drive-thru growth due to aesthetic or traffic safety concerns. A thoughtfully designed pad site sees these requirements as opportunities: creating buildings that look appealing from the street and screening stacking lanes to preserve sightlines, thereby protecting both the tenant’s brand and surrounding property values that attract future tenants. Experienced development partners stand out by anticipating the planning commission’s aesthetic concerns and integrating solutions early in the design process, which helps reduce entitlement timelines and minimizes project carry costs.

The Profitability Equation

For NNN investors and developers, the profitability of drive-thru locations is closely linked to the overall QSR investment strategy. About 70% of QSR customers now use mobile apps or digital platforms to place orders, with digital orders averaging about 20% more per ticket than in-store orders. This means the pickup lane must manage two separate customer flows, traditional ordering and pre-ordered digital pickups, without causing delays. Chains that have separated these flows report significant improvements in throughput and profit margins; automation and dedicated pickup systems have also resulted in labor savings of several hundred basis points for some early adopters.

Meanwhile, the overall traffic trend in QSRs is more uncertain than it was two years ago. Several major chains have experienced softness in same-store sales and declining traffic through late 2025, as promotional strategies aimed at value shifted transaction timing rather than increasing overall visits. This situation emphasizes the importance of site fundamentals, such as cap rates, trade area strength, co-tenancy, and drive-thru design, since, in a market with flatter traffic, choosing sites that efficiently convert visits into sales preserves value.

Finding the Balance

Long-term successful developments rarely focus on maximizing a single variable, such as increasing capacity at the cost of streetscape or sacrificing aesthetic detail for better throughput. Instead, they are designed with all three considerations in mind from the start: traffic engineering that accounts for peak-hour volume, design that respects the local community, and a pro forma reflecting the actual capacity once operations begin. As drive-thru demand evolves and municipalities across the western U.S. tighten their design standards, maintaining this balance will become increasingly important for the planning, approval, and implementation of QSR and retail projects.

CategoriesNews & Blog

Investing in the Next Generation: Lessons From Our Youngest Intern

By LRE Companies,

At LRE & Co, development is about more than constructing buildings or completing transactions. It is also about developing people.

Over the years, we have taken great pride in mentoring young people and giving them an opportunity to experience the professional world. We take that responsibility seriously. An internship may represent only a few weeks in a young person’s life, but the lessons, encouragement and relationships formed during that time can stay with them for years.

Our hope is that when these students eventually enter the workforce and begin building their own careers, they remember that someone believed in them early on. We may have played only a small role in their journey, but even a small role can make a meaningful difference at the right time.

This summer, LRE welcomed one of our youngest interns, a high school student named Larry.

When Larry first joined us, we knew he was interested in learning about real estate development. What we did not fully appreciate was the amount of responsibility and real-world experience he already had.

While keeping up with school and participating in sports, Larry had also been helping his mother and working for a construction company. He was not simply observing from the sidelines. He was performing physically demanding work and learning firsthand what it takes to build something.

That experience led him to an important question: Construction is difficult, but how do developers decide what to build, finance a project, manage the process and eventually lease or sell the property?

That curiosity brought him to LRE.

Throughout his internship, Larry demonstrated a strong work ethic, a willingness to listen and a genuine interest in understanding the business. He asked thoughtful questions and wanted to learn not only what we do, but why we make certain decisions.

His mentor in our office, Gabriel, was especially impressed by Larry’s attitude, effort and ability to take direction. By the end of the summer, Larry delivered a final presentation to our team that showed how much he had learned and how seriously he had approached the opportunity.

I was impressed.

One of my personal concerns is that young people can sometimes become accustomed to opportunities without fully appreciating the work and sacrifice behind them. It can be easy to take education, employment and professional access for granted.

Larry reminded us that there are many young people who are eager to learn, willing to work and prepared to earn every opportunity they receive. They may simply need someone to open the door and give them a chance.

Internships should not be about giving students busy work or allowing them to place a company name on a résumé. A meaningful internship should expose them to real responsibilities, real expectations and real conversations about their future.

It should also challenge those of us who are already established in our careers. Mentoring requires patience, time and involvement, but it is one of the most worthwhile investments a company can make.

At LRE, we remain committed to working with the next generation. Whether a student eventually chooses a career in real estate, construction, hospitality, finance or an entirely different field, we want them to leave our office with greater confidence, practical knowledge and an understanding that hard work still matters.

We are proud of Larry and grateful that he chose to spend part of his summer learning with our team. We wish him continued success as he begins his senior year of high school, and we look forward to seeing where his work ethic and curiosity take him next.

 

CategoriesNews & Blog

Finding the Next QSR Hot Spot in Utah

By LRE Companies,

Utah has quietly become one of the most competitive quick-service restaurant markets in the western United States. For brokers and developers still evaluating sites the way they did a decade ago, that competition is a warning: the state’s growth is real, but it is no longer evenly distributed, and the easy sites are already taken. Finding the next QSR hot spot in Utah now requires more than a rooftop count and a traffic study.

Why Utah Keeps Winning

Between 2010 and 2020, Utah experienced the fastest growth among US states, gaining about 500,000 residents for an 18.4% increase. This trend has persisted, with the state’s population expected to reach around 3.45 million, mostly along the Wasatch Front—Salt Lake, Utah, Davis, and Weber counties.

The retail market supports this demographic growth. Retail vacancies in Salt Lake County is approximately 2.57%, and in Utah’s major markets, vacancy rates are often below 3%, making it one of the tightest retail environments nationally. Along the Wasatch Front, asking rents in NNN leases have risen to about $23 per square foot, with West Utah County corridors exceeding $30 per square foot in prime areas. Limited inventory is giving sellers strong pricing power, which benefits proactive brokers identifying emerging trade areas early, but challenges developers who hesitate to commit until a corridor is proven.

Where the Next Wave Is Building

Silicon Slopes — Lehi, Draper, American Fork, and the Point of the Mountain corridor remain the state’s highest-velocity growth engine, driven by daytime tech and biotech employment layered on top of residential expansion. But the more interesting opportunity for site selectors right now sits one ring out: the west side of the Salt Lake Valley and the undeveloped land in Utah County, where mountains and lakes don’t constrain growth the way they do in more built-out submarkets. These are the areas attracting the next generation of rooftops, and QSR site selection has always followed rooftops before it follows headlines.

Southern Utah deserves a second look as well. St. George and the broader Washington County submarket are compounding population growth with a tourism economy anchored by Zion National Park and Sand Hollow, giving operators a rare combination of resident and visitor demand supporting the same box. Newmark’s Mountain West research team described the broader Intermountain West as showing sustained population growth and expanding investment infrastructure heading into 2026, with construction starts cooling in a way that should support fundamentals over the next twelve months, a dynamic that favors developers who can move now, before supply catches back up to demand.

What Actually Predicts a Winning QSR Site

The fundamentals of QSR site selection haven’t changed even as the market has tightened; they’ve just gotten less forgiving of shortcuts.

Traffic counts still matter, but they aren’t sufficient. Unlike convenience stores, QSRs can’t rely on traffic counts alone. Proximity to rooftops is the differentiator, since the P.M. consumer is most likely to visit a QSR within one to two miles — a five-to-seven-minute drive — of home. A site with strong AADT but a thin residential base within that radius will underperform a lower-traffic site embedded in genuine density.

Breakfast has changed the daypart calculus. For years, most QSRs outside a handful of national chains optimized only for the P.M. side of the road. The rise of the breakfast daypart, now a meaningful share of QSR margin, has made A.M. visibility and drive-time-to-work patterns as important as the traditional dinner commute — a factor too many trade area studies still underweight.

Foot traffic data is now table stakes, not a luxury. Placer.ai’s foot traffic analysis of 2025’s biggest QSR traffic surges reinforces that winning locations increasingly depend on demand generation, not just placement — but demand generation only works when the underlying site fundamentals are sound. For brokers building a pitch to institutional capital, current device-based visitation data, paired with a demographic study, is quickly becoming the standard, not the differentiator.

National operators are still expanding west. In-N-Out’s 2025 development plans continue to expand into new western states, and its current map already includes Utah alongside Nevada, Oregon, and Idaho — a signal that even the most conservative, credit-tenant QSR operators view the broader region as underpenetrated relative to demand. That’s the same thesis LRE & Co. applies when underwriting net-lease QSR product across the West.

The Takeaway

Utah’s upcoming quick-service restaurant hotspots won’t be identified by areas where rents have already reached $30 per square foot. Instead, they’ll be located just outside these core corridors, where new rooftops are still emerging, and the trade area hasn’t yet fully reflected the permitted growth. With retail vacancy rates below 3% and limited developable land, the opportunity to acquire and secure entitlements at a reasonable cost is shrinking each quarter. Brokers who can combine current foot traffic insights with a clear understanding of rooftop development timelines, along with developers willing to act before the headline data indicates, will dominate the next wave of QSR locations across the Wasatch Front and Southern Utah.

CategoriesNews & Blog

The Quiet Reliability of NNN: Why Triple-Net Leases Are Reshaping California’s Retail Corridors

By LRE Companies,

Commercial real estate has spent the past few years relearning a lesson about volatility. Office towers sit half-empty, multifamily cap rates whipsaw with every rate decision, and industrial demand has cooled from its pandemic-era sprint. Against that backdrop, the triple-net (NNN) lease has quietly become one of the steadiest instruments in the market, nowhere more visible than in California’s retail corridors, where credit-backed, long-duration leases are reshaping how developers underwrite, build, and hold real estate.

A Bond Wrapped in Real Estate

The mechanics explain the appeal. In a triple-net structure, the tenant, not the landlord, covers property taxes, insurance, and common-area maintenance, leaving ownership with a largely passive, predictable income stream. Layer in a corporate-guaranteed tenant and a 10- to 20-year term, and the asset starts to behave less like a building and more like a long-duration corporate bond with a real estate hedge. That framing is exactly how institutional capital increasingly prices it.

What the Numbers Are Saying

The Boulder Group’s Q1 2026 Net Lease Research Report put the overall single-tenant net lease cap rate at 6.80%, with the retail subsector averaging 6.55%, a level that has held essentially flat for two consecutive quarters after a long climb. But that headline number masks a widespread trend driven entirely by tenant credit. Investment-grade, ground-leased quick-service brands have been priced as tight as the low 4% range, while sub-investment-grade pharmacy and drugstore credits have traded above 8%, a spread of roughly 370 basis points for functionally similar real estate. In Net Lease, the building matters far less than who signs the lease.

California compresses that math further. Statewide, NNN cap rates for credit-backed retail typically range from 4% to 5.5%, among the tightest in the country, reflecting high property values, dense demand, and intense investor competition for a limited supply of institutional-grade product. Move outside the coastal core, into the Inland Empire, the Central Valley, or Northern California’s secondary metros, and cap rates loosen to a still-competitive 5.0% to 6.5%, offering a meaningful yield boost without sacrificing the credit quality that anchors the strategy.

Scarcity Is Doing the Heavy Lifting

Beneath the pricing story is a supply story. Retail construction across California’s major metros has pulled back sharply: Los Angeles’ under-construction retail pipeline fell more than 23% year-over-year, and completed deliveries dropped nearly 50%. San Francisco’s retail vacancy has fallen for four straight quarters, down to 5.6%, as limited new supply collides with improving tenant demand. San Diego has held a tight 4.5% vacancy rate even through a soft leasing stretch. Nationally, shopping-center vacancy sits near 5.9%, and available space for lease remains near historic lows industry-wide.

That scarcity matters to developers as much as to investors. When new retail construction is this constrained, every well-located, freestanding pad site, the kind built around a national QSR, pharmacy, or essential-service tenant, becomes disproportionately valuable. Developers who can deliver that product are effectively supplying an asset class the market has stopped building at scale.

The Tenants Driving the Demand

The tenant categories anchoring this activity are notably consistent: quick-service restaurants, pharmacies, dollar stores, and auto-service operators, the essential, recession-resilient retail formats that continue to expand store counts even as e-commerce reshapes the rest of the sector. These are the tenants underwriters describe as “investment-grade” or “credit” tenants, and they are also the formats best suited to the freestanding, single-tenant pad sites that define ground-up NNN development. As larger-format retailers continue to right-size their footprints nationally, this smaller-format, essential-use retail has become the more dependable growth engine and the one California’s tightly constrained retail corridors have room to absorb.

Why Developers Are Leaning In

For a firm building across the western U.S., the NNN structure changes the calculus at the ground-up level. A corporate-guaranteed, long-term lease de-risks a development well before stabilization, supports more favorable construction and permanent financing terms, and gives a project a clear, comparable exit; institutional and 1031 buyers alike understand exactly how to underwrite a single-tenant net-lease asset. Section 1031 exchanges remain fully available for net-lease property in 2026, and that steady flow of exchange capital continues to chase this profile precisely: corporate credit, long lease term, minimal landlord responsibility.

The rent-growth trade-off is real; NNN leases typically include modest 1% to 2% annual escalations rather than the sharper mark-to-market resets of multi-tenant retail. But in a market defined by scarcity and tight vacancy, predictable, contractual growth on a hard-to-replace asset is proving to be exactly what capital wants right now.

The Takeaway for California’s Retail Corridors

Triple-net retail isn’t the flashiest story in commercial real estate, and that’s precisely the point. In a cycle where volatility has become the default across nearly every other asset class, NNN’s quiet, credit-anchored reliability is doing something more valuable than generating headlines; it’s delivering durable returns and disciplined development in corridors where new retail supply is hardest to come by. For developers positioned to deliver that product, from the Central Valley to the Inland Empire and beyond, that reliability isn’t a consolation prize. It’s the strategy.

What ties all of this together is discipline: selecting the right corridor, securing the right tenant credit, and structuring the lease term to match the capital that will eventually take out the construction loan. That is the underwriting discipline institutional and 1031 buyers expect, and it’s the standard by which every new NNN development in California’s retail corridors is now measured.

CategoriesNews & Blog

The Hospitality Markets Nobody Is Talking About, But Should Be

By LRE Companies,

For years, hospitality investment has been dominated by a familiar list of markets. New York. Los Angeles. Miami. Nashville. Austin. Las Vegas.

These destinations continue to attract travelers, investors, and developers, but they are increasingly competitive, expensive, and saturated.

The next wave of hospitality opportunities is emerging elsewhere.

Across the country, a growing number of secondary and tertiary markets are quietly outperforming expectations as travelers seek authentic experiences, businesses expand into new regions, and local economies diversify. While major cities continue to receive most of the attention, some of the strongest long-term hospitality opportunities may be found in places that rarely make national headlines.

For developers and investors willing to look beyond traditional gateway cities, the opportunity is significant.

The Shift Away from Traditional Hospitality Hubs

The hospitality industry has undergone a major transformation over the past several years. Travelers increasingly prioritize experiences over destinations. Remote work has expanded travel flexibility. Population growth has accelerated across many secondary markets, particularly throughout the Sun Belt.

At the same time, rising land costs, labor challenges, and development expenses in major metropolitan areas have made secondary markets increasingly attractive to investors.

According to PwC’s 2026 hospitality outlook, leisure travel demand is increasingly concentrated in warmer-weather and secondary markets, with demand growth expected to outpace new supply growth in the lodging sector. RevPAR (Revenue Per Available Room), one of hospitality’s key performance indicators, is projected to grow 2.9% in 2026 as demand continues to broaden beyond traditional urban centers.

The trend is clear: travelers are expanding their horizons, and developers should be doing the same.

The Rise of Lifestyle Destinations

One of the most overlooked opportunities today is the growth of smaller, lifestyle-oriented destinations. These are not necessarily major tourism hubs. Instead, they are communities with strong local identity, outdoor recreation, walkable downtowns, culinary scenes, wineries, cultural attractions, or unique natural assets.

Travelers increasingly want authentic experiences rather than manufactured ones. They are seeking places that offer character, connection, and a sense of discovery.

This shift has fueled demand for boutique hotels and experience-driven hospitality concepts. The global boutique hotel market reached approximately $28.5 billion in 2025 and is projected to exceed $50 billion by 2033. Leisure travelers account for more than 70% of boutique hotel demand, reflecting a growing preference for unique accommodations over standardized lodging. For developers, this creates opportunities in markets that may have previously been overlooked by institutional capital.

Secondary Markets Are Becoming Primary Opportunities

Population migration patterns are creating entirely new hospitality demand centers. Cities across Texas, Idaho, Montana, Utah, Tennessee, Arizona, and the Carolinas have seen significant population growth over the past decade. Businesses have followed. So have conferences, sporting events, healthcare investments, and tourism infrastructure.

As a result, many secondary markets now support hospitality demand levels that would have been hard to imagine just a few years ago.

Industry observers note that investors are increasingly targeting secondary and tertiary markets because of population growth, economic diversification, and lower barriers to entry than in primary gateway cities. These markets often offer stronger development economics and greater upside potential for long-term investors.

The opportunity is not simply building hotels where people live.

It is creating destinations where people want to stay.

Convention and Event Markets Are Quietly Winning

Another underappreciated hospitality segment is the emerging convention and events markets.

While major convention cities remain important, a growing number of mid-sized markets are successfully attracting meetings, conferences, sporting events, and regional gatherings.

These events create year-round occupancy drivers that help reduce seasonality and stabilize hotel performance.

Recent industry data highlight strong convention-driven hospitality growth in markets such as Louisville and St. Louis, where meeting and event activity has significantly boosted hotel demand and occupancy. In downtown St. Louis, occupancy increased by more than 8% year-over-year, while RevPAR grew by more than 9%, outperforming national trends.

Developers who understand the relationship between event infrastructure and hospitality demand may find opportunities where others see only secondary cities.

Outdoor Recreation and Wellness Destinations

One of the strongest trends shaping hospitality today is the convergence of wellness, recreation, and travel.

Travelers increasingly prioritize outdoor experiences, wellness-focused getaways, and destinations that offer meaningful escapes from urban environments.

This trend is creating opportunities across mountain communities, lake destinations, wine regions, coastal towns, and outdoor recreation hubs.

Luxury hospitality brands are investing heavily in wellness-oriented experiences, while boutique operators continue to capitalize on travelers seeking immersive, personalized stays. Industry research shows that experiential travel and wellness-focused hospitality remain among the sector’s fastest-growing segments.

For developers, this often means looking beyond traditional tourism metrics and focusing on lifestyle demand drivers.

Why Timing Matters

Perhaps the biggest reason these markets deserve attention is timing.

Competition remains significantly lower than in major hospitality hubs. Land costs are often more manageable, and development pipelines are less crowded. Local governments are frequently more supportive of investment and economic development initiatives.

Meanwhile, hotel investment activity continues to strengthen. U.S. hotel transaction volume reached approximately $24 billion in 2025, a 17.5% increase year-over-year, as investors returned to the hospitality sector.

The window to establish a presence in many emerging hospitality markets may not remain open indefinitely.

Looking Ahead

The future of hospitality development will not be defined solely by the largest cities.

It will be shaped by communities that offer authenticity, lifestyle appeal, economic growth, and unique experiences travelers can’t find elsewhere.

The markets attracting the most attention today may not necessarily offer the best opportunities tomorrow.

For developers willing to think differently, some of the most compelling hospitality investments may be hiding in plain sight.

The smartest hospitality strategy isn’t always to follow the crowd.

Sometimes it’s finding the markets nobody is talking about—before everyone else starts talking about them.

LRE & Co. | Commercial Real Estate Management and Development

CategoriesNews & Blog

Looking for a Development Partner in the West?

By LRE Companies,

The western United States is one of the most dynamic real estate development environments in the country. Population growth, infrastructure investment, and shifting tenant demand are reshaping markets from the Wasatch Front to the Inland Empire. For capital partners and landowners entering these markets, choosing the right development partner is one of the most consequential decisions in the deal stack.

Unlike markets in the Northeast or Southeast, the West carries a distinct set of development risks: long entitlement timelines, politically active communities, constrained infrastructure capacity, and rapid cost escalation. A development partner who performs well in Dallas or Atlanta may be entirely unprepared for what a high-growth municipality in Utah or Arizona demands. Here’s what to evaluate before committing to a relationship.

Why Western Markets Require a Different Playbook

Western real estate markets have consistently outperformed national benchmarks. Utah’s population grew by 18.4% between 2010 and 2020, making it the fastest-growing state in the country, according to U.S. Census data. The greater Phoenix metro added more than 90,000 residents in a single year, and the Boise metro has ranked among the top 10 fastest-growing metros nationally for multiple consecutive years.

Commercial real estate has followed the population. CBRE reports that the Mountain West region saw industrial vacancy rates fall below 4% in 2023, and retail vacancy in high-growth suburban corridors has reached historic lows. JLL data indicates that net absorption of retail space in the Intermountain West has been positive for 12 consecutive quarters.

What this means practically: development in the West is competitive, entitlement timelines are long, and community relationships directly affect project outcomes. Developers who treat these markets as transactional opportunities consistently underperform against those who invest in genuine local presence.

The Three Phases Where Partner Quality Gets Tested

Most development partnerships are evaluated at the wrong moment, during a pitch, when every firm presents its best projects and smoothest execution. A more reliable test is to ask how a partner performs across three phases where the real work happens: pre-development underwriting, entitlement navigation, and execution through lease-up. The quality of each phase compounds into the final project outcome.

The strongest western-focused developers share a common trait: they maintain internal teams with sustained local knowledge rather than rotating generalist consultants across markets. Depth of local presence, measured in years of municipal relationships, not just closed deals, is one of the strongest predictors of entitlement success in the West.

Phase One: Market Intelligence and Site Selection

Rigorous pre-development underwriting is the first place to differentiate serious Western developers from opportunistic ones. The evaluation process should cover trade-area demographics, traffic counts, competitive supply pipelines, and tenant demand signals, all before a site goes under contract. This discipline matters more than ever as costs have surged: according to the Associated General Contractors of America, construction input costs rose by more than 41% between 2020 and 2023, making accurate underwriting a prerequisite for project viability rather than a formality.

For capital partners and institutional co-investors, the benchmark to set is simple: every site decision should be documented with supporting data on absorption trends, population growth, employment density, and comparable project performance. If a development partner cannot produce that framework on demand, it signals how decisions are made throughout the project lifecycle.

Phase Two: Entitlements and Community Partnership

Entitlement risk is one of the most underappreciated variables in Western development. In high-growth markets, planning departments are often understaffed relative to the volume of applications, and community opposition can delay or derail projects that aren’t carefully positioned. The National Association of Realtors estimates that entitlement delays add an average of 14 months to residential project timelines; commercial timelines face similar headwinds.

The development partners who consistently shorten entitlement timelines in the West share one practice: they engage municipalities early, well before formal application, presenting projects as community assets rather than external impositions. Public-private dialogue built into the process from the outset does not guarantee frictionless approvals, but it meaningfully reduces timeline variability and builds the kind of goodwill that translates into long-term market access.

When evaluating a partner’s entitlement track record, ask specifically about contested approvals, not just clean ones. The willingness to show how a firm navigated community opposition, adjusted design, or worked through planning department delays reveals far more than a highlight reel of quick approvals.

Phase Three: Execution and Lease-Up

Execution quality in Western development comes down to two things: delivering on time and on budget, and leasing the project efficiently. On the leasing side, the key question is whether a development partner has active tenant relationships in place before delivery or plans to build them after the ribbon-cutting. In markets where retail vacancy in premium western corridors is running below 5% per CBRE benchmarks, well-located product leases quickly, but the relationships to place tenants efficiently are built over years, not during lease-up.

For capital partners, the reporting standard to expect is straightforward: regular construction milestone updates, early-stage leasing progress, and no surprises buried in quarterly reports. Transparency from groundbreaking through stabilization is not a courtesy; it is a structural requirement for any well-run development relationship.

Who Should Be Evaluating a Western Development Partner

The investor profiles most active in western development partnerships tend to fall into a few categories: institutional capital partners and family offices seeking direct exposure to western commercial real estate without building internal development infrastructure, and landowners or municipalities seeking a capable private-sector partner for sites with complex entitlements or phased development challenges. Each brings different priorities to the relationship, but all share the same fundamental need: a partner with demonstrable local knowledge and a full-lifecycle track record.

The right fit for a western development partnership is a capital partner or landowner who values transparency, takes a long-term view of market positioning, and understands that community relationships are structural — not soft — variables that affect project returns. Firms that treat entitlement goodwill as optional tend to discover its value only after a project stalls.

The Bottom Line

Western real estate is not a market for generalists. Population growth is real, tenant demand is strong, and the development pipeline in high-quality submarkets is constrained by entitlement complexity rather than a lack of capital. What separates successful projects from stalled ones is execution quality and community credibility.

When evaluating partners for a Western project, the question is not just who can raise capital or close a site. The question is who can deliver across all three phases, underwriting, entitlements, and execution, in markets that demand genuine local credibility. That combination is rarer than it appears on most pitch decks.

 

CategoriesNews & Blog

The Shopping Center Isn’t Dead. It Just Needed Better Tenants.

By LRE Companies,

For the better part of a decade, the retail real estate industry sat through an extended funeral that never quite concluded. “Retail apocalypse” became the phrase of record. Anchor tenants filed for bankruptcy in waves: Sears, JCPenney, Pier 1, and Tuesday Morning. Vacancy rates climbed. Investors pulled back. Journalists wrote obituaries for the American shopping center with the confidence of people who hadn’t visited one in a while.

Here’s what they missed: the shopping center wasn’t dying. It was being filtered.

The centers that struggled deserved to struggle. They were built around a tenancy model that prioritized lease volume over experience, treated retail as a warehouse function rather than a community one, and offered no answer to the convenience that e-commerce delivered at scale. But the centers that invested in their tenant mix, physical environment, and role in the surrounding community? Those didn’t just survive. They’re outperforming.

What the Data Actually Shows

The headline vacancy numbers from the peak of the so-called apocalypse masked a more nuanced story. Yes, enclosed-mall vacancies climbed. CoStar data showed regional mall vacancy rates hitting approximately 11.4% in 2022, the highest in decades. But strip centers, open-air lifestyle centers, and well-curated neighborhood retail told a different story entirely. According to CBRE’s 2023 U.S. Retail Outlook, availability rates for neighborhood and community centers dropped to their lowest levels since 2007, finishing the year near 10.2%, driven by sustained demand from service-oriented and experiential tenants filling the void left by struggling big-box chains.

The market wasn’t rejecting retail real estate. It was rejecting bad retail real estate.

And perhaps the most clarifying data point: e-commerce, despite its explosive growth, has plateaued as a share of total retail sales. The U.S. Census Bureau consistently reports that e-commerce accounts for roughly 15–16% of total retail sales, significant but far from the full displacement story that dominated the narrative a decade ago. The other 84% still happens in physical space. The question was never whether people would stop shopping in person. It was whether landlords would evolve their properties to give them a reason to show up.

The Tenant Revolution

The transformation happening across well-managed retail centers right now is a tenant story. The operators who are filling vacancies and driving traffic aren’t the ones from the legacy retail playbook. They’re fitness studios, medical and dental practices, urgent care providers, specialty grocery concepts, chef-driven restaurants, pickleball facilities, and local boutique operators who understand that their physical space is their brand.

This shift has been staggering in scale. Healthcare-related tenants, including urgent care clinics, physical therapy practices, and dental groups, have become among the most active retail leasing categories nationwide. JLL reported that healthcare tenants accounted for nearly 25% of all new retail leasing activity in 2023, a figure unimaginable in 2005. These tenants generate steady foot traffic, maintain strong credit profiles, and serve non-discretionary demand that no e-commerce platform can replicate.

Food and beverages have undergone a parallel transformation. Regional and local restaurant concepts are outpacing national chains in leasing velocity. According to the National Restaurant Association, independent restaurant operators account for approximately 67% of all U.S. restaurant locations. Landlords who once chased national credit tenants are increasingly recognizing that a beloved local operator with community loyalty drives stickier traffic than a chain with 20 other locations in the market.

The Experience Imperative

None of this is accidental. The retail centers performing today have made a deliberate bet on experience, on the idea that a shopping center’s job is no longer to aggregate products but to aggregate reasons to be there.

That means design matters. A 2022 Placer.ai study found that open-air retail centers with dedicated food-and-beverage clusters drove 34% more repeat visits per quarter than centers without them. It means programming matters, with events, markets, fitness classes, and community gatherings that give the center a presence in the neighborhood’s weekly rhythm. And it means tenant curation matters more than almost anything else. One wrong tenant, a use that generates no traffic, no energy, and no reason for a neighboring tenant to benefit, can hollow out a center’s momentum faster than vacancy can.

The landlords winning right now are operators, not just owners. They think about their tenant mix the way a hotel operator thinks about its food-and-beverage concept, as an integral part of the experience, not an afterthought.

The Opportunity Ahead

The filtered landscape over the past decade has left a significant runway for well-capitalized, operationally sophisticated retail owners. Distressed or undermanaged centers in strong demographic markets offer some of the most compelling repositioning opportunities in commercial real estate today. The physical infrastructure is often sound, and location fundamentals haven’t changed. What’s needed is a curation strategy, a capital commitment to the physical environment, and the patience to build a tenant ecosystem rather than simply fill square footage.

The shopping center isn’t dead. It just needed someone to take it seriously again.

CategoriesNews & Blog

How We Think About Development in America’s Fastest-Growing State

By LRE Companies,

Utah doesn’t whisper its ambitions. The numbers announce them. The Beehive State has consistently grown in population to earn a permanent place at the top of the national growth rankings. As of the most recent U.S. Census Bureau data, it is the fifth-fastest-growing state in the country, and its real GDP growth rate led the nation at 4.5% in 2024. The state’s nominal GDP crossed $300 billion for the first time in history. Unemployment sits at 3.1%, well below the national rate of 4.0%. These are not the statistics of a market you watch from a distance. These are the numbers that tell a developer where to be.

Here is how we think about it.

The Demand Story Is Structural, Not Cyclical

The first question any developer should ask about a market is whether the growth is real or borrowed. In Utah, the answer is unambiguously the former.

Utah’s population reached approximately 3.55 million as of mid-2025, up more than 18% over the past decade alone. Utah County, anchoring the Provo-Lehi corridor and the state’s booming tech sector, added nearly 16,000 residents in a single year, accounting for 36% of the state’s total growth. Cities like Saratoga Springs and Eagle Mountain, which barely existed three decades ago, are now among the fastest-growing communities in the country, posting annual growth rates of 8.4% and 6.8%, respectively, in 2025.

Crucially, this growth is not purely migration-driven, which would make it more susceptible to economic shocks. Natural population change, with more births than deaths, now accounts for 57% of Utah’s annual growth, a structural demographic tailwind that holds up across economic cycles. A young, family-forming population base creates durable, compounding demand for housing, services, hospitality, and the built environment broadly.

For a developer, that distinction matters enormously. Markets built on migration alone can reverse. Markets built on natural demographic vitality don’t.

Where We Focus — And Why

Not all of Utah’s growth is created equal, and our playbook reflects that geography matters as much as headline statistics.

The Wasatch Front remains the economic engine. Salt Lake, Utah, Davis, and Weber counties together account for two-thirds of the state’s annual population growth and the vast majority of its job creation. Utah’s information technology and professional services sectors — clustered in what’s increasingly called the “Silicon Slopes” corridor — have made outsized contributions to GDP, with the information industry growing to more than 2.7 times its 2015 output as of 2025. Construction costs on the Wasatch Front range from $280 to $550 per square foot for residential development, reflecting both the depth of demand and the constraints of a market that, by some estimates, is short by more than 37,000 housing units.

Washington County and St. George arguably represent the most compelling secondary market in the Mountain West. Washington County posted 2.3% population growth over the past year — among the highest in the state — and St. George ranked third statewide in residential permit activity. The combination of year-round sunshine, proximity to recreation, second-home demand, and retiree migration creates a hospitality and mixed-use opportunity that few comparable markets in the country can match.

Emerging ring counties — Tooele and Iron, each posting 3.0% population growth over the past year — are attracting our attention as well. These are the markets where land basis still makes sense, entitlement timelines are more manageable, and the Wasatch Front’s overflow growth is inevitably landing.

The Hospitality Lens

Utah’s five national parks, world-class ski resorts, and growing convention infrastructure drive leisure demand that spans the year rather than concentrating in a traditional peak season. At the same time, the Silicon Slopes tech corridor has built a legitimate corporate travel base — business demand that stabilizes performance across cycles when pure leisure markets soften.

Nationally, the lodging market has shown steady resilience. ADR and RevPAR have stayed near record levels through 2025, with upper-midscale and upscale select-service properties — our target segment — continuing to outperform. The select-service model aligns well with Utah’s growth profile: it serves both the business traveler driving Highway 15 between Salt Lake and Provo and the family road-tripping from Zion to Bryce. That dual demand base is rare and valuable.

We focus our hotel development on submarkets where demand generators are layered — proximity to employment corridors, access to recreational assets, and positioning within growing residential catchment areas. A hotel built purely on ski demand is a seasonal bet. A hotel built where skiing, business travel, and a growing residential population converge is a fundamentally different underwriting story.

What We Respect About This Market

Utah rewards patience and punishes shortcuts. Entitlement processes are increasingly complex as communities grapple with rapid growth and strained infrastructure. The state needs about 28,000 new housing units per year just to keep pace with population growth — yet residential permitting has contracted, falling to roughly 22,000 units in 2024, the lowest since 2016. That supply-demand gap has consequences for commercial development too: labor is tighter, construction costs are higher, and community sentiment toward new development is more nuanced than the growth headlines suggest.

We don’t ignore those friction points. We build them into our underwriting, timelines, and community engagement strategies. The developers who treat Utah as an easy market because the population curve points up are the ones who get surprised by permitting or stabilization.

The developers who do the hard work of understanding which submarkets, product types, and demand generators are truly durable — those are the ones building the portfolio this market deserves.

CategoriesNews & Blog

Nyah Patel – Internship Interview

By LRE Companies,

At LRE & Co, mentoring the next generation has always been more than a good idea — it’s a genuine passion. We believe that the lessons learned early in a career can shape a person for life. I started my first job at 15½, working at McDonald’s, and the values that experience instilled in me — hard work, accountability, and showing up — still guide everything I do today. That’s why we are committed to building a robust internship and mentorship program that gives young people real, hands-on experience in real estate development throughout the year. We want students to leave our doors with a lasting skill set, a stronger professional foundation, and a genuine understanding of how this industry works.

Today, we are proud to welcome Nyah Patel to the LRE family. Nyah has hit the ground running — diving into tenant research, sharpening her professional communication skills, and bringing an energy and curiosity that has impressed our entire team. We hope this experience is the foundation of something lasting for her.

Here’s what she had to say about her time with us so far.

What made you interested in interning at LRE?  I’ve always been interested in business and in learning how different buildings and developments come to life. When this opportunity was offered to me, I was very excited to gain hands-on experience in a real professional environment.

What kind of work have you been helping with so far? I’ve been researching potential tenants for our development sites, which has given me a closer look at how the leasing and retail sides of real estate work.

What has been the biggest thing you have learned during your internship? I’ve learned how to stay focused and organized in a professional setting. I’ve also developed practical skills in professional communication, such as writing effective emails and understanding how important it is to follow up consistently.

What part of the business has been most interesting to you: hotels, retail, restaurants, construction, finance, or operations? Finance and retail have stood out the most to me. Both areas feel closely connected to the bigger picture of how a development comes together and succeeds.

What is one task or project that surprised you? I was surprised by how much persistence it takes to move a deal forward. If you want something to happen, you have to keep pushing and reaching out because these deals don’t close on their own.

What skill do you feel you are building through this internship? I’m building confidence in communicating professionally with adults and learning how to ask the right questions. I’ve also improved my ability to research thoroughly and develop a solid understanding of topics I wasn’t familiar with before.

How is working in a real business environment different from school? In school, you’re usually given clear instructions to follow. But here, you have to think independently and approach problems creatively. 

What have you learned about responsibility, communication, and deadlines? I’ve learned that communication is everything, including asking questions and staying in contact with your team, which shows dedication and keeps things moving. I’ve also taken on a greater sense of responsibility, knowing that my work affects not just me but the people I’m working with.

What is something you understand better now about real estate development? I have a much better understanding of the full process behind how the buildings around us are developed and just how long and complex that process really is.

What advice would you give another high school student starting their first internship? Never stop asking questions, as it’s one of the most valuable lessons I’ve learned. It shows that you care and helps you gain a better understanding of whatever you’re working on. 

What has been your favorite part of the internship so far? My favorite part has been learning about the many steps involved in developing a building. There’s so much more to it than most people realize, and seeing that process up close has been really eye-opening.

What do you hope to learn by the end of your internship? I hope to leave as a stronger communicator and a more creative thinker. I hope to approach challenges with confidence and find solutions that aren’t always obvious at first.

 

CategoriesNews & Blog

The Case for Select-Service Hotels: Why Smart CRE Capital Is Moving Into This Sector

By LRE Companies,

In commercial real estate, the search for yield rarely comes with simplicity. Most asset classes that deliver strong returns also carry complexity, including layered operating risk, volatile demand cycles, or structural headwinds that require constant navigation. Select-service hotels are a notable exception. In today’s environment, that exception matters.

For investors and operators who understand hospitality real estate, select-service and extended-stay hotels have quietly become one of the most compelling allocations in the CRE landscape. The numbers back it up. The fundamentals are sound. And the opportunity window, shaped by limited new supply, evolving traveler behavior, and a maturing lending environment, is one that sophisticated capital is actively seeking to capture.

Record Performance in a Challenging Market

The headline stat is hard to ignore: according to JLL’s U.S. Select-Service and Extended-Stay Hotel Outlook 2025, RevPAR (revenue per available room) in this sector reached a record $78 in 2024, 14% above 2019 pre-pandemic levels. Demand surged by 232,000 room nights year-over-year, nearly completing a full recovery from the COVID disruption.

This isn’t a one-cycle story. It’s a structural shift.

What drove it? The convergence of the select-service and extended-stay categories into a unified market. Properties in this space now blend amenities, in-room kitchenettes, flexible workspaces, and self-service food and beverage options to appeal to a broader, more diverse traveler base. Business travelers, remote workers, and leisure guests are all finding value in the same product. That demand for diversity is exactly what CRE investors look for when underwriting long-term asset performance.

The Margin Story Is the Real Headline

For anyone deploying capital into operating real estate, margins are the metric that separates good assets from great ones. This is where select service truly distinguishes itself from the broader hospitality landscape.

Gross Operating Profit (GOP) margins in select-service properties averaged about 26%, compared with just 15% for full-service hotels — a gap driven by leaner labor costs and the absence of food and beverage operations, which are notoriously difficult to run profitably. Full-service hotels carry complex staffing structures, multiple food and beverage outlets, and conference infrastructure that consumes revenue as quickly as it generates it. Select service strips away that complexity without sacrificing the guest experience.

The result is a cleaner, more durable income stream. EBITDA per available room (EBITDA/PAR) in the select-service sector has grown at a 23% CAGR since 2020, while CPI averaged about 5% over the same period, meaning this asset class has meaningfully outpaced inflation in profitability growth. For a CRE investor focused on real returns, that spread is significant.

Investment Volume and Liquidity

Institutional conviction in this sector is no longer speculative; it’s measurable. Since 2021, select-service and extended-stay hotels have generated $62.6 billion in investment liquidity, accounting for nearly 50% of all U.S. hotel transaction volume, according to JLL.

This level of capital concentration is meaningful for two reasons. First, it signals consensus among sophisticated investors on the sector’s risk-adjusted return profile. Second, it creates liquidity, the ability to transact, refinance, and exit, which many CRE niches lack.

JLL also notes that this sector exhibits the lowest yield volatility over the past 16 years among major property categories. In a macro environment defined by rate uncertainty, inflationary pressure, and shifting demand patterns across office and retail, low volatility is not a minor advantage. It is an advantage.

Supply Discipline Creating Pricing Power

One of the more overlooked tailwinds in this sector is the supply picture. New select-service and extended-stay construction has slowed to below 2.6% of existing inventory, below its historical average. Meanwhile, the number of brands in the sector has grown from 184 in 2000 to 214 today, representing 74% of the sector’s total room supply, according to JLL. Marriott, Hilton, and IHG are all expanding aggressively through franchise-driven growth, conversions, and targeted acquisitions.

The implication for asset values is straightforward: when demand is growing and new supply is constrained, existing assets gain pricing power. ADR growth and occupancy stability follow. Investors entering this space now are capturing assets before that compression fully plays out.

What LRE & Co Sees in This Sector

From a commercial real estate perspective, the select-service hotel thesis aligns with what we seek across asset classes: durable cash flows, margin resilience, supply constraints, and a broadening base of institutional capital that provides exit liquidity.

The lending landscape is also evolving favorably. While banks remain dominant in this space, JLL notes increased participation by insurance companies, CMBS lenders, and investor-driven debt sources, a diversification that reduces refinancing risk and offers greater structuring flexibility for acquisitions and development.

The broader U.S. hospitality real estate market is expected to grow from approximately $1.03 trillion in 2025 to $1.39 trillion by 2031, at a 5.1% CAGR, according to Mordor Intelligence. Within that growth trajectory, select-service is positioned to capture a disproportionate share, driven by its operational model, adaptability to evolving traveler preferences, and the simple fact that it delivers better returns with less complexity.

The Bottom Line

In commercial real estate, the assets that compound quietly, deliver consistent yields, attract durable institutional capital, and remain relevant across economic cycles tend to reward patient, disciplined investors most.

Select-service hotels have earned that designation. The data for 2024 and early 2025 isn’t a short-term spike; it reflects a sector that has matured, evolved, and positioned itself as one of the more defensible income plays in the current CRE environment.

At LRE & Co, we continue to evaluate select-service opportunities with the rigor this asset class deserves and with the conviction that the fundamentals support them

Get in touch

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(415) 491 – 1500

4302 Redwood Hwy Suite 200

San Rafael, CA 94903

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Get in touch

phone

(415) 491 – 1500

4302 Redwood Hwy Suite 200

San Rafael, CA 94903

email

info@lrecompanies.com

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about us

The LRE & Co is a family organization that has been in real estate development, construction and the food and beverage businesses since 1999. It has been present in major markets throughout northern California and northwest Nevada.

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