Five Keys to Food Hall Relevance in 2023
We were reading an article on LinkedIn where real estate professionals were commenting about where they see food hall viability in mature cities for which a mature body of food hall “experience” can be witnessed.
Comments say things like a “reasonably fast failure rate, with few winners” while at the same time noting that “big winners do exist” and investors keep investing for good reason: “When they are right, they are really right” or “tired stalwarts that may not be that ‘good’”. All these things are true. Retail professionals are slowly triangulating the required criteria for success. More on that below.
Recently, we’ve seen higher profile glitzy deliveries in some major markets and major traffic pickup as a result. We’ve also seen more spin outs than many retail professionals want to acknowledge. Finally, the food hall environment is changing, rapidly. When we look back at 6-9 year old deliveries, some haven’t upgraded the experience and traffic has waned big time. These are the spin outs. Some have continually edited/upgraded and it shows. It’s so easy for any retail shopper to simply make a different purchasing decision “next time” that food hall owners have to be very in tune with fundamentals to remain relevant.
So, why not just do something else? “When it’s right, it’s really right.” In short, in the top 10% of projects, everyone is making a lot of money.
“When it’s right, it’s really right”
In the top 10% of food hall projects, investors are receiving outsized returns and excellent premiums on adjacent GLA. So, how does one go about being in the upper reaches of performance? We think it’s a focus on guest experience coupled with truly fantastic retail real estate.
Is the business wobbly? Not really, but you really shouldn’t cut corners. Someone else will just come along and eat your lunch in a year or two. And, like every industry, it’s very easy to fall in the mediocre middle. By the way, a 10% “home run” rate is wildly higher than CPG, software, podcasting, fashion, film, music, or food brands. We scrutinize food halls because they are expensive to build and the losses hurt. Like any hospitality business, the management is a marathon. In the past six months, I have been to several food halls where 1) they spent the right money, but on the wrong location, OR 2) they had the right location, but didn’t spend the right money, or 3) they have the right location and money but built way too big/small for the market.
At any rate, these five things are imperative if you are thinking of food halls in 2023:
They must be grand (or feel reasonably grand for the location). We call them halls; don’t shoe box them.
Design really matters. Retail food and beverage is an insanely competitive market. Food halls need to occupy a space for multi-use tasks, be beautiful enough to be a destination, and generally a place you’d like to sit. Otherwise, it’s competing with QSR and the vendors will never be able to match the price point.
Relationships up and down stream are the lifeblood of the food hall. Owners and managers must know the tenant’s business and support them authentically to be successful. Say it with me: “This is not a passive rental business, unless you hire a property manager.”
Ease of access and ticket times are key to guest experience and volume. This should be obvious.
Location, location, location
Politan Group specializes in operating food halls, bars, and bars within food halls. We also provide remote accounting, HR, and administration for food halls. Finally, we provide fractional management services for existing food halls where a team needs a leadership group that understands the business of food halls. If you are thinking of building a food hall or need help with an aspect of a food hall you already own, reach out to us. Politan is the most-awarded food hall operator in the industry.