Proliferating food halls are a rare bright spot in a limping retail leasing scene. Health clubs and fast-casual eateries help make up for the scarcity of traditional stores, but food halls of many stripes lend prestige to all kinds of properties and provide a valued amenity to a building’s office workers or residents.
These halls draw big crowds despite revolving-door vendors and customer complaints that they’re cramped, noisy and more expensive than they appear.
But how long can the trend go on? No New York City food hall has yet failed. Most landlords and brokers see even more growth, despite some ominous red flags.
New York City now boasts 30-odd food halls by one definition or another. They range from 10,000 to 50,000 square feet — the latter a super-category that includes Le District and Hudson Eats at Brookfield Place in Battery Park City and DeKalb Market Hall at CityPoint in Downtown Brooklyn. They exist, in different forms, in apartment buildings (like City Acre at 70 Pine St.) and in office towers (the new Urbanspace at 570 Lexington Ave.)
They’re in hotels (the Plaza and Row NYC), shopping malls (New World Mall in Flushing), the subway (TurnStyle at Columbus Circle), train terminals (Great Northern at Grand Central), and in previously vacant or underutilized storefronts (Frame on Fifth at 345 Fifth Ave.)
Last summer landlord/developer Philip Chong installed a 12,000-square-foot court at 265 Canal St. Canal Street Market includes the first satellite of Nom Wah Tea Parlor, the fabled dim sum spot in Chinatown.
But Lulu’s smoothie stand — with a prime spot just inside the entrance — quickly gave way to shaved-ice purveyor Kakigori. Vendor instability is widespread, even in other locations such as Gotham West Market, where a number have left since it opened on 11th Avenue in Midtown West in 2013.
One sign of possible trouble is swift vendor turnover. Another is softening rents — although those are hard to quantify because deals can be structured in many ways, from straight rental leases to arrangements where vendors give landlords or management a percentage of their gross profits to combinations of the two.
For straight rental leases, Eastern Consolidated’s James Famularo says, “A food hall can typically pay anywhere from $100 to $300 per square foot depending on the size, location and density of the area.”
The low end of this range is much cheaper than most retail rents, which run to $250 a foot even in secondary markets. Now, there are signs that even those modest numbers are falling. That could actually be a sign of strength, not weakness, in the food hall market because it means that landlords will bend over backwards to get tenants.
Urbanspace inked a deal with the Feil Organization for an 11,400-square-foot food hall at landmarked office tower 575 Lexington Ave., a few blocks north of the well-established operator’s popular Urbanspace Vanderbilt.
Although we reported last year that the asking rent at 575 Lexington was $1.5 million, several sources say that the “taking” rent was much lower — in the neighborhood of $1 million — because Feil was hungry for a “credit” tenant to fill the large space formerly occupied by Mr. K’s restaurant. (Per-square-foot estimates are difficult because there was a “blended” price for several floors.)
Food halls differ from old-fashioned food courts full of generic chains in that they boast esoteric, artisanal and local vendors — including such prize chefs as ramen master Ivan Orkin at Gotham West Market and “Arepa Lady” Maria Piedad Cano at DeKalb Market Hall. But the distinction between the new wave and the courts of yore has grown fuzzier. Some smaller food halls resemble salad bars with a sushi counter.
The halls do business in different ways. At “multi-concept” locations, a single operator turns out all the food at various themed counters. At “multi-vendor” sites, a landlord or master leaseholder taps outside vendors to sublease various stalls or counters within the hall.
Although Anthony Bourdain and his partners pulled the plug on a long-planned, $60 million, indoor-outdoor food hall on Pier 57 last month, plenty more major projects are either under construction or planned, notes Douglas Elliman’s Faith Hope Consolo. There’s the seafood-themed hall and market by celebrity chef Jean-Georges Vongerichten at the South Street Seaport. Steven Kamali Hospitality is rumored to be considering a fancy food hall for Bloomingdale’s top floor. (Bloomingdale’s didn’t get back to us; Kamali declined to comment.) Consolo adds she reps a former bank space in Downtown Brooklyn that’s coveted by “every major operator.”
But it’s unclear how many more halls of any stripe the market can bear.
Newmark Knight Frank’s Jeffrey Roseman is optimistic: “There’s lots of space to be filled out there.” Consolo adds, “Food halls are going to absorb a lot of space not being taken by banks and drugstores.”
On the other hand, Eastern Consolidated’s Famularo cautions, “There are way too many of them. Food halls are good for one thing these days — to occupy a space as a placeholder until the landlord finds a higher-paying, more permanent tenant.”
CBRE’s Amira Yunis says, “I receive calls from landlords from Manhattan to Oklahoma every week who say, ‘Bring me a food hall.’ The amount would be staggering if they all came. It would be more than the market would bear.”
Industry analysts estimate that a landlord or developer needs to spend up to $200 per square foot on the complicated infrastructure a sophisticated hall might require.
“Many food halls are not operating at a profit, and it’s unclear how long they’ll be able to sustain themselves,” Yunis adds.
A few years ago, the city had only a handful of food halls — mother-of-them-all Chelsea Market, which launched 20 years ago, preceded Eataly, Gotham West and Todd English at the Plaza, which are now mainstays.
Then came the torrent. Time will tell whether, or when, it will dry up.