‘Ghost kitchens’ are popping up in malls amid retail's decline

Brick-and-mortar retail’s decline has hollowed out malls across the U.S. and put store chains like Toys ‘R’ Us and Sears (SHLD) out of business.

But it’s not all doom and gloom: The downward trend has spurred a phenomenon, dubbed “ghost kitchens,” in which new kitchens find a home empty mall spaces.

Built by property developers, these kitchens exist only to make food for delivery and could provide a boost to companies like Uber (UBER) with its UberEats service and Grubhub (GRUB).

According to the Wall Street Journal, developer Simon Property Group (SPG) and Accor (AC.PA) are partnering with hospitality firm SBE Entertainment Group to develop 200 ghost kitchens in both malls and hotels. The roll out is slated to begin in New York, Chicago, San Francisco, Los Angeles and Miami.

“It’s relooking at all real estate that is obsolete,” SBE Chief Executive Sam Nazarian told the Journal.

Amazon.com Inc. packages are being sorted in a Macy’s Inc. parking lot at a mall in Langhorne, Pennsylvania, on November 17, 2018. (Photo: REUTERS/Suzanne Barlyn)

CloudKitchens, the delivery-kitchen start-up founded by former Uber CEO Travis Kalanick, is one of the companies taking advantage of the trend. The company caught the attention from Saudi Arabia’s sovereign-wealth fund last year, quietly raising $400 million dollars.

The trend of ‘ghost kitchens’ hasn’t been welcomed by all. The New York City Council’s Committee on Small Business recently held an oversight hearing to discuss whether ghost kitchens are a friend or foe to mom-and-pop restaurants to assess if the concept needs to be regulated.

Despite a potential backlash, the demand for food delivery is showing no signs of slowing down. Revenue for the online delivery segment of the food sector is currently $2.3 billion, according to Statista.

That number is expected to rise to $2.9 billion by 2024.

Bridgette Webb is a producer at Yahoo Finance. Follow her on Twitter @bridgetteAwebb.

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