One attraction still drawing shoppers to malls: Food

Original article published on MSN News via CNBC

You might’ve noticed more and more mall food courts are changing, ditching fast-food chains for local eateries. And that’s not on accident.

Mall owners say they’ve been steadily increasing the percentage of retail square footage at any given property dedicated to food and beverage, creating new food halls. The push to make these changes is compelling, industry experts have told CNBC. The goal is to drive traffic to the property and keep shoppers lingering longer.

“Every landlord today is thinking about increasing the percentage of [gross leaseable area] to food,” Naveen Jaggi, the head of JLL’s retail advisory business in the Americas, told CNBC. “The old model of having a food court … it was a precursor to having a food hall.”

Food halls, unlike food courts, often include a bar, which can appeal to a younger audience. Some mall owners, like Washington Prime Group, are going as far as adding their own craft breweries. Gone are traditional fast-food chains like Wendy’s, Subway and Burger King. Instead, there’s an emphasis within food halls on local restaurateurs, healthier options and eclectic fare.

Forty percent of consumers today will pick a mall or shopping center to visit primarily based on the restaurants located there, according to a new report from commercial real estate services firm Jones Lang LaSalle. And younger shoppers are turning to new brands like Sweetgreen, Bareburger and Cava Grill for a meal. McDonald’s won’t cut it.

Further, customers who eat at the mall will then spend 35 additional minutes, on average, browsing stores than the person who doesn’t eat there, JLL found in surveying retail properties across the globe. That’s good news for landlords and tenants.

JLL said it also sees the biggest spikes in foot traffic at those retailers’ stores situated right near the food options, making it an attractive strip of real estate.

“What we are hearing from millennials is they want authentic dining experiences,” Jaggi said. “There’s a direct parallel between the quality of food and time spent in a mall.”

Mall owners have been more and more vocal about their plans to upgrade their food offerings.

GGP, for example, has said only 25 percent of its future deals with tenants will be for apparel (based on gross leaseable area), compared with more than 50 percent in 2015. Food is expected to account for about 22 percent of deals moving forward, according to GGP. It used to be just 11 percent.

Macerich, Taubman, Simon and PREIT — the publicly traded U.S. mall owners with some of the highest-quality assets in their portfolios (based on sales per square foot) — have said more of the same recently. The trend is really just beginning to pick up steam, with many redevelopments coming down the pipeline.

Simon’s Aventura Mall in Aventura, Florida, late last year was remodeled to include a massive food hall, bringing in a dining concept curated by celebrity chef Todd English, Shake Shack, Luke’s Lobster, Blue Bottle, Joe & The Juice, and a handful of other local options serving poke bowls, ceviche and Mediterranean-inspired meals.

GGP has been testing a pop-up food hall known as FOMO, which stands for “fear of missing out.” At the first FOMO location at GGP’s Northbrook Court in Northbrook, Illinois, restaurants are rotated in and out of the space, sometimes on a daily basis. One of the FOMO restaurants was “Blind Cafe,” where customers have dinner in the dark to experience what it’s like to be blind.

Melinda Holland, the senior vice president of business development at GGP, told CNBC the response to FOMO has been overwhelmingly positive, and the REIT plans to take it to other malls.

“Food and entertainment … are the new traffic drivers,” Lawrence Group Chief Executive Officer Steve Smith told CNBC. He’s helped bring in new food and beverage options to a mixed-use development called City Foundry STL in St. Louis’ historic midtown district. “We want to be local, not national … especially on the food side.”

PREIT’s Fashion District Philadelphia, currently under construction, will include a whole host of local eateries with a big emphasis on farm-to-table, CEO Joseph Coradino has told CNBC. The area, known as “Market Eats,” will feature outdoor seating with food carts, a made-from-scratch pizza spot, a sports bar and bakery, among other options, he said.

Taubman’s $500 million renovation of the Beverly Center in Los Angeles will include “The Street,” a food hall curated by chef Michael Mina that is set to be unveiled later this year. Roughly 15 restaurants in the new space could include a ramen bar, poke bowls and an eatery with globally inspired barbecued meats, Mina has said.

Source: JLL, U.S. Census Data

JLL found that an additional 12 percent of sales are generated at other stores in the mall by those shoppers who stop to eat there compared with those who don’t. Spending meanwhile on meals out is on the rise, data from the U.S. Census Bureau show.

In a separate report released earlier this week, commercial real estate services firm Cushman & Wakefield is predicting that by 2020, there will be three times as many food halls across the U.S. at retail properties. The firm is currently tracking more than 200 existing and planned food halls.

“Food halls are about so much more than just real estate,” said Garrick Brown, national retail research director at Cushman & Wakefield. “No other retail category has generated as much aggressive expansion over the past few years as food-related retail. … Food halls offer consumers a definitive experience — and for that reason, they’re largely e-commerce-proof.”

Other retail properties often cited by industry experts for their attractive food offerings today include Westfield’s Century City development in Los Angeles, which brought Eataly and Chick-fil-a to the West Coast, along with Caruso’s The Grove in Los Angeles — another foodie mecca.

A mall owner’s return on investment in adding a food hall might not be exactly linear, said Ami Ziff, director of national retail at Time Equities.

“I can’t tell you exactly how you’re going to make money, but if you spend more money on renovations and create a better ambiance … we feel strongly more people will shop there, and sales will rise,” Ziff told CNBC. “And as sales rise, rents rise, and you can increase tenant retention.”