By JOE GOSE
Determined to provide experiences that will attract consumers and persuade them to open their wallets, developers are opening more food halls, the food court’s up-and-coming sibling, which are in the midst of a robust expansion.
Unlike food courts made up of fast food chains, food halls typically mix local artisan restaurants, butcher shops and other food-oriented boutiques under one roof. Many celebrate quirkiness versus uniformity, and their ability to draw crowds is particularly appealing to landlords battling the growth of e-commerce and changing shopping habits.
“Food halls are a place where there’s life and there’s buzz,” said David LaPierre, vice chairman of the global retail services team at CBRE, a commercial real estate services firm. “It’s a real social environment where people want to be.”
In Downtown Brooklyn, the DeKalb Market Hall food hall opened recently in the basement of City Point, a retail, entertainment and restaurant project spanning six levels on the former site of the Albee Square Mall. Traffic for the food hall ramps up primarily in the lunch and dinner hours, and some spills into the rest of the mall, said Christopher Conlon, chief operating officer for City Point’s developer, Acadia Realty Trust, a retail property investor based in Rye, N.Y.
“DeKalb Market Hall has already had a tremendous impact on tenant traffic in the upper levels,” he said. “But we also have space on the ground floor still to lease, and the interest driven by the excitement surrounding the food hall has been just as tremendous.”
At 36,000 square feet, the food hall features 40 vendors, including the first Katz’s Deli outside Manhattan and a few Foragers Market concepts operated by Anna Castellani, who worked with Acadia Realty to select the tenants and manage DeKalb Market. A 7,500-square-foot entertainment venue opening this fall will extend food hall business hours past midnight, Mr. Conlon said.
Food halls have been around for years, especially in Europe. But the concept is becoming increasingly popular in the United States as consumers demand healthier and better-tasting “quick casual” food options in entertaining environments, observers say. The number of food halls operating in the United States is expected to exceed 200 in 2019, about double the number that were open in late 2016, said Pamela Flora, director of research for Cushman & Wakefield. That would also be a roughly 700 percent increase since 2010, according to research compiled by the brokerage firm.
Food halls are not just for retail outlets, however. Pinnacle Red Group, based in San Jose, Calif., plans to put a small one on the ground floor of a planned residential and office tower in downtown Oakland. The developer hopes to leverage a bustling street and nearby transportation hubs to create a regional destination, said Ronnie Turner, development manager for the firm.
In downtown Chicago, the 15-vendor Revival Food Hall opened last year on the ground floor of a 110-year-old, 20-story office building designed by Daniel Burnham. The food hall’s developer, Craig Golden, is finishing a renovation of the property, now known as the National. He and the restaurateur Bruce Finkelman worked as partners on Revival, which features taco, seafood, poke bowl and other restaurants as well as a book and record shop.
“We wanted to bring in what we thought was the best food in the city,” said Mr. Golden, whose Blue Star Properties portfolio includes a number of restaurants and entertainment venues. “When people come downtown to work, the choices are limited.”
Food halls are still so new that they lack a standard template for success, said Philip Colicchio, a food and beverage consultant in New York, who has added food halls to his chef and hotel client list. The properties range from 5,000 square feet to more than 40,000 square feet, and developers can choose to lease out and operate a food hall themselves, collaborate with a local restaurateur to vet vendors and potentially manage it, or lease to one operator and let it find tenants and run the place.
“The good news is that there are some terrific vendors that can provide great food and beverage in food halls,” said Mr. Colicchio, who is consulting on food halls in Cincinnati, San Francisco and the Bahamas. “What does not yet exist is a deep talent pool of management.”
The management piece will become critical as the concept matures, competition increases and vendors fail, he added. When developers accelerated the food hall boom a few years ago, consumers were spending as much or more on eating out than at grocery stores. But a glut of new restaurants and a change in consumer spending habits have dinged the industry.
Same-store restaurant sales dropped 2.8 percent in July and have been relatively flat or down for about a year, according to the latest report by TDn2K, which tracks weekly sales from 28,5000 restaurants.
Against that unnerving backdrop, developers of large, full-blown food halls can expect to spend at least $200 a square foot to provide expensive infrastructure like venting for open-flame cooking, Mr. Golden said. Alternatively, developers can seek vendors that prepare food off site to simplify operations and minimize costs. Smaller food halls with seven to 10 vendors are popping up with more regularity, too, Ms. Flora said.
Despite the operating and cost variations, most food halls are focused on bringing in local or regional chefs and incorporating a bar into the mix. And if the bar has outdoor seating and can provide nighttime entertainment, all the better, Mr. Colicchio said.
Developers establishing food halls with those themes include North American Properties, which bought the 1970s-era Colony Square mixed-use project in Atlanta two years ago. It will soon begin demolishing a food court to make way for a food hall that will feature up to 15 vendors and emphasize live entertainment and other events.
“It’s less about bringing people onto the property to drive retail and more about being a place where people can come and commune,” said Mark Toro, a managing partner for North American Properties.
Food halls are beginning to migrate to the suburbs, and although observers expect more growth in those environments — and eventually malls — they wonder if enough demand exists to support food halls in those locations. Jeffrey A. Bayer, the chief executive of Bayer Properties, a mixed-use developer based in Birmingham, Ala., is betting there is.
This month, Bayer Properties will hold the grand opening of the Barn, a 10-vendor food hall at the Summit at Fritz Farm, its new retail, office, residential and hotel development seven miles southwest of downtown Lexington, Ky. The food hall will serve as an anchor for the development, which is across the street from a successful regional mall, near the University of Kentucky, and surrounded by housing and retail, he said.
“I, for one, don’t believe that the whole world is moving back to the central core,” Mr. Bayer said.