An Explosion Of Food Halls: 7 Things You Need To Know

Though big-box retailers continue to suffer from declining foot traffic, stagnant expansion and shuttering stores as consumer preferences shift in favor of e-commerce, it’s not all doom and gloom for the industry. Food-related retail continues to see aggressive growth as Americans are eating out more than ever. This can be seen in the growing prevalence of food halls.

Recent Cushman & Wakefield research reveals food halls are gaining momentum in the US eatery, particularly amongst Millennial foodies looking for more outside-the-box experiences. Below are seven need-to-know facts about the rise of food halls and their growing prevalence in today’s hot markets, as outlined by C&W director of retail research in the Americas Garrick Brown.

1. Food Halls vs Food Courts

In the past, US food halls were a mere collection of food-related proprietors in a tourist hotspot, but the modern food hall is a cultural experience. Garrick tells us food halls include a mix of tenants that offer both prepared and unprepared food, usually with an artisanal bend to it. This includes food vendors, farm-to-fork vendors and quality, authentic restaurants.

It’s easy to get food halls and food courts confused, but the two differ greatly. The successful food hall can range from 10k SF to 100k SF depending on the location, Garrick says, and is an incubator space for people to taste and try new, exciting and sometimes bizarre concepts.

“The best projects I’ve seen have been really creative with their common area spaces. They don’t just put out a bunch of tables, they leave room for cooking classes, demonstrations, book signings and entertainment type-spaces,” he says.

2. A Fast-Growing Concept

The report identified about 110 existing food halls in the US; as of 2018 that number is expected to pass the 200 mark.

“The market will basically double in the next two years, which is huge,” Garrick says. “That’s good and bad news. I think there’s going to be a lot of great projects (down the line), but I also think people will jump on the bandwagon who won’t get that you can’t just make a glorified food court. You have to look at quality, authenticity and getting the right tenants.”

3.  Ideal Locations

Retail landlords aren’t the only ones looking to food halls to boost traffic and sales. In addition to mall owners looking to food halls to fill empty big-box space, hoteliers, office and apartment building owners are looking to plug in food halls on the ground floor of high-rise buildings.

“There’s been a lot of interest in plugging food halls in as anchors. I’ve talked to people at big REITs, such as the likes of General Growth Properties and Westfield. The idea is if you have a Sears, JCPenney or Macy’s store that’s closed, you can come out ahead if you get rid of that space and put in a food hall where you can charge greater rents.”

4. Theme-Inspired Food Halls

Garrick says the US is likely to see more theme-inspired food halls, like Italian-themed marketplace Eataly, which you can find anchoring the World Trade Center and expanding into Toronto. Eataly is a single-operator food hall—meaning a developer may rent the space for $60/SF, for example, then turn around and lease it to different users for $120/SF.

Similarly, projects focused on Latin-themed cuisine like Latinicity in Chicago have already hit the scene, and Chinese-inspired food hall China Live based in S.F. is slated to open in 2017.

5. Tenant And Developer Perks

Food halls are particularly hot in major markets like New York, Chicago, Boston and San Francisco. This is good news for restaurants looking to expand their footprint in top markets without opening full-sized locations. Though food hall rents are typically on the high end, operators are finding they can afford the small spaces, Garrick says.

“These restaurant operators save money, they get better foot traffic and from a developer’s point of view they’re recession-resistant,” Garrick says. “Many developers do month-to-month leases, which gives the freedom to mix up the tenant mix with something new to bring tenants back.”

6. Leading Markets

Great Britain is credited with starting the first food hall experience in London; the concept has since been adopted throughout all of Europe, embraced by Asia and continues to gain momentum in North America, particularly in the US. New York City is now the leading food hall capital of the world, beating out London last year. As of 2016, New York City has eight food hall projects slated for completion and several under development. Garrick projects Los Angeles will be the second-largest market in the US to embrace food halls come 2018.

7. The Single Downfall

As the food hall trend continues to catch fire among mall developers and office and multifamily operators, Garrick says the niche may be overbuilt by 2018, losing some of its value.

“In retail real estate, everyone wants a piece of the pie and jumps for it," Garrick tells us. "The best projects will survive and thrive, but there’s always some stuff that doesn’t work out."