Downtime Counted ‘In Hours’: Food Halls Emerge As The Safe Bet For Restaurant Industry Development

If the years since the onset of the pandemic were supposed to be some of the hardest ever for the restaurant industry, someone forgot to tell food halls.

Touted as the hottest new trend in retail five years ago, food halls came out of the crisis comparatively unscathed to standalone restaurants. And though not every destination dining venue made it out alive, enough did that industry specialists say it has proved its mettle as the safest investment in restaurant real estate.

“It appears to be the lowest risk that a food professional can take in opening up new ventures,” said Phil Colicchio, executive managing director and food, beverage and entertainment expert at Cushman & Wakefield. 

Of the 82 food halls opened since March 2020, when the pandemic hit U.S. shores, only 15 closed, according to data compiled for Bisnow by Cushman & Wakefield.

That leaves 321 food halls operating across the country, with another 145 under development, according to the data.

Food halls are typically housed in a large, shared space — Cushman & Wakefield says the existing average food hall size is 20K SF — with multiple independent food vendors and a bar.

The ability to easily switch out vendors, host private and public events, and offer a communal setting for groups that may want to eat different cuisines all contribute to their resilience, according to Colicchio and Cushman Executive Director Trip Schneck, who also specializes in food, beverage and entertainment.

The two researchers predicted in May 2020 that the food hall model was well positioned to survive the pandemic. That appears to be borne out by the numbers, particularly when contrasted with standalone restaurants.

Opening a restaurant is risky. Independent restaurants have about a 20% to 22% failure rate within the first year in the best of circumstances, Colicchio said. Meanwhile, the National Restaurant Association estimates about 90,000 have closed as a direct result of the pandemic, about 13.6%, though The Washington Post noted flaws with the association’s methodology. 

The 15 of 82 food halls that closed within the past two-and-a-half years represent a failure rate of 18% for ventures launched during the pandemic, but less than 5% overall. With an additional 145 under development, the number of food halls in the U.S. is set to surge by up to 45% in the coming years. 

“We’re kind of picking up steam here with the amount of projects that are in development right now,” Schneck said. 

Vendors within food halls can turn over at a similar rate as traditional restaurants, say 10% to 20%, Colicchio said. But that doesn’t mean the food hall will fail.

“Frankly, the food hall is built as a hedge to that,” Colicchio said. “If you’re a landlord and you’ve just leased 3.5K SF to a restaurant that doesn’t make it, you’re two years in the hole. But with a food hall, if a stall doesn’t make it, you’re able to transition very, very quickly.” 

That's especially true if the food hall runs on a licensing system, which is typical, he said. In that case, a good general manager could bring in a temporary vendor while a new concept is found to replace it, he said.

“So you don’t have that 12- to 18-month downtime that you have if a restaurant doesn’t make it and closes its doors," Colicchio said. "You have … a downtime that can be counted in hours, or a couple of days."

Courtenay Jeffers, the general manager of ChefScape Kitchen in Leesburg, Virginia, has seen that model work even better than expected since opening in 2019. ChefScape occupies a 16K SF building, 6K SF of which is a rentable commissary commercial kitchen. The food hall has three fixed options and kiosk space for special concepts, as well as a “very large bar,” a popular fixture of destination dining venues, Jeffers said.

The original plan for ChefScape’s food hall was to have vendors rotate every six months, so it could be a jumping off point for small businesses, she said. But some concepts have stuck. In May, South American eatery Columbian’s Place will have been there for four years, she said, one of several to weather the pandemic.

ChefScape made it through the mandatory shutdown in early 2020, partly because they quickly started a to-go model, Jeffers said, and the commissary propped them up. 

“It was tough but we made it,” Jeffers said.

Now, ChefScape is planning a rebrand to separate its food hall from the rest of the business and add a microbrewery. Its location in a family-oriented shopping center lends itself well to weekend business, as do events including bingo, trivia and live music in the evenings, she said.

A major advantage of food halls is the minimal fixed seating, allowing spaces to be rearranged to host such events, Colicchio said. The number of food halls under development testifies to the the real estate community’s realization that food halls are a multipurpose amenity, he said. 

“What we have absolutely seen, over the last three months in particular, is a big uptick in use of the food halls as venue spaces because they're being booked by businesses,” Colicchio said. 

Businesses might not have people in the office like they used to, but they still want to build company culture. Corporate events at food halls are a relatively inexpensive way to do that, Schneck said.

“The food is already there, the beverage is already there, you don't need catering, right?” Schneck said. “You know, there's a whole lot of things you don't need. What you need is space. And you need [the space] where people can mingle.”

Lina Goh, one of the partners planning to open a food hall called Eat Street Crossing in Minneapolis by this spring, is putting a slightly different spin on the food hall concept.

Goh already owns and operates Zen Box Izakaya, a ramen and Japanese comfort food restaurant, but has always been interested in being involved with a food hall. Goh was born in Malaysia and grew up in Singapore, where hawker centers — food courts tailor-made for picky eaters like those in her large family — are popular.

“It’s the kind of environment where you can go to … an establishment where you’re not restricted to just one thing, or one cuisine,” Goh said. “My mom and dad would say, ‘OK, you can get this and you can get that, and we’ll just find a table and we’ll sit down and we’ll eat together.’ It’s easy and it’s fast.”

Eat Street Crossing is not going with the prevalent licensing model either, as the partners opening the food hall are chefs, who are carefully curating five restaurants with Brazilian, Asian and American influences that they intend to be permanent.

“It may be easier for those that are just building a shell and just renting it out to vendors,” Goh said. “But I think for us, our concept itself is basically five times the kind of detail that you have to look into.”

One thing Eat Street Crossing won't lack is the huge bar common to food halls from coast to coast. The bar is what helped transform food halls from something useful for office workers in central business districts to popular social destinations, Colicchio said.

“We had a breakfast and lunch place and then at 5 o'clock, you know, crickets,” he said. “Then, the idea of ‘Let's have a small bar.’ Well small bar became larger bar, and larger bar became, ‘Alright, let's design the bar first. And the food hall around it.’”

Diverse experiences and tastes are what helped make food halls a satisfying destination for groups, and is what Jeffers mainly credits for ChefScape’s resilience.

“I think it’s the variety that’s offered, it’s definitely a multicultural dining experience,” she said.

The researchers agree.

“It's a collection of chef-driven concepts all under one roof. So it offers the consumer a level of optionality that they simply can't get at a standalone restaurant,” Schnek said.

Yet food halls' success doesn’t have to come at anyone else’s expense. The restaurant industry is strong right now, Colicchio said, despite the National Restaurant Association reporting that 50% of operators expect to be less profitable this year thanks to inflation and "the trifecta of higher food costs, labor costs and energy/utility costs."

“We haven't seen any type of cannibalism,” he said. “Both of these categories are doing very, very well. And maybe that speaks to a broader picture. You know, that retail is really in a good place right now. Better than it's been in a long time.”