If you feed them, they will come.
That appears to be the hope of retailers and mall operators throughout the U.S. as they rush to install a plethora of food formats to lure finicky and tight-fisted consumers to shop.
“The typical department store is losing ground every day,” said Jaime Fasja, co-chief executive officer of Thor Urbana, the Mexican affiliate of Thor Equities. “We see what’s happening with the big department stores in the U.S. We believe that the centers of future will have new anchors — food and beverage is the new fashion.”
Traffic at North American shopping centers has been declining since 2015, when it fell 8.1 percent in December, and it remained in negative territory through December of 2016.
The confluence of interrelated reasons include consumers’ continued shift to online and digital. There is also the difficult-to-engage Millennial cohort, the country’s biggest demographic, which values experiences over purchases. Department and specialty stores have been closing at an alarming rate. The 2017 tally so far is about 1,000 stores, including Macy’s Inc., Sears Holdings Corp., The Limited, American Apparel, BCBG Max Azria Global Holdings, Wet Seal, J.C. Penney Co. Inc. and Abercrombie & Fitch Co. units.
Now mall owners and retailers are hoping elevated food offerings and chef-driven restaurants can give consumers an appetite for, well, shopping.
MAPIC, producer of the world’s largest international retail real estate conference, in May will make food and beverage the focus of its Milan event featuring a diversity of cuisines, because “food consumption is breaking all records. Because of the shopping center evolution, mall owners want to find the top trends from authentic food to natural and healthy, to street food, to made-to-order dishes,” said Nathalie Depetro, MAPIC’s show director, noting that it’s all part of “the gourmet-ization of food.”
New Italian flavors will be sampled such as Fattorie Garofalo’s mozzarella bistro concept; Aromatica, showcasing a different top chef each month; Bistrot’s menu created with the University of Gastronomic Sciences in Pollenzo, Italy, and Pizzikotto.
Attendance at February’s Entertainment Evolution Experience in Santa Monica, Calif., doubled over last year, which in 2016 had twice as many participants as 2015. “All the mall guys were there,” Garrick Brown, vice president, research, Americas, Cushman & Wakefield, said. “There were all the big players. The place was a zoo. It’s really indicative of where the market is going. Every center is trying to upgrade and shift the tenant mix and build more space for upscale dining and food halls.”
Cushman & Wakefield reported that “food is a major growth driver everywhere,” noting that consumers last year spent $730.6 billion on meals eaten away from home, surpassing for the first time the amount spent on food consumed at home, $718.1 billion. In New York City, residents in 2016 spent 40.5 percent of their disposable income on food.
Gross leasable space occupied by food uses has more than doubled in shopping centers to 15 percent from seven percent a decade ago, according to JLL, which estimated the number will grow to 20 percent in the coming years.
Brown is even more bullish. “In an age when every retailer is looking at shrinking its footprint, malls are trying to plug better food offerings into that space,” Brown said. “If you were to ask Westfield Corp., Simon Properties and GGP 10 years ago how much space they set aside for food and beverage, they would have said 10 percent. Now, it’s 20 percent and rising.”
Another reason for the enthusiasm: food and beverage can increase a shopper’s dwell time. Researchers Jikyeong Kang and Youn-Kyung Kim in a 2001 study found that shoppers who experienced a high level of enjoyment spent more time at the mall. Subsequent research found no correlation between the length of stay and average spend, however, entertainment and restaurants established a center as the dominant player in a market.
Thor Urbana allots 32 percent to 33 percent of gross leasable area to restaurants and bars. “For us to do the volume we do, increasing the entertainment and food and beverage concepts is key,” Fasja said. “If people stay longer, it translates into higher sales.”
Calle Corazon, the company’s 150,000-square-foot project in Playa del Carmen, boasts seven dining spots and boîtes, including a branch of New York’s Catch, Argentinian steakhouse Harry’s Grill, Panaderia and 20 Laviente Cantina, among others.
“We’re all about creating culinary destinations, where you have local, regional and national players,” Fasja said. “It becomes the center of gravity. The stores stay open until 11 p.m. You see people shopping after their meals at 10 p.m.”
The food hall is the plat du jour, with the number in the U.S. expected to increase from 25 in 2010 to 200 in 2019, according to Brown.
This isn’t news to European department stores such as El Corte Inglés, whose Plaza Callao in Madrid offers a Gourmet Experience and Le Bon Marché with is La Grande Epicerie de Paris.
Eataly’s immersive Italian gastronomic tour featuring coffee bars, restaurants and markets can be found at the Prudential Center in Boston. A location was unveiled at Westfield World Trade Center in Manhattan last year and Eataly will anchor Westfield Century City’s 400,000-square-foot expansion in Los Angeles.
“Department stores are underperforming in terms of sales and traffic,” Brown said. “The truth is, department stores haven’t been up to the task of anchoring shopping centers for some time. Dominant malls have turned to food halls as traffic drivers. Eataly’s doing no less than $1,200 a square foot in sales.”
Malls are watching San Francisco’s China Live, which hopes to do for Chinese food what Eataly did for Italian. The high-end operation features three restaurants, including one serving live lobster. Todd English’s 12,000-square-foot American Market by Todd English, set to bow in Times Square, will also be followed closely.
“We’ll be announcing a 40,000-square-foot food hall operator for [Manhattan’s] Hudson Yards in 30 days,” said Kenneth Himmel, president of Related Urban Development. “It’s a very well-known, highly regarded chef brand that will be new to the project.”
An emphasis on elevated dining has long been the approach of Related Cos., which lured Thomas Keller, the celebrated chef of the French Laundry in Napa Valley, to the Shops at Columbus Circle, where he unveiled Per Se and Bouchon.
“We’re applying all those learnings [from the Shops] on steroids to Hudson Yards,” said Himmel. “If you look at Shops, especially the third and fourth floors, we wouldn’t do that kind of sales volume if we didn’t have any restaurants. Some restaurants at our properties do $14 million to $15 million in annual sales in 7,000 square feet of space.
“The retail world is waking up to the fact that food is vital,” Himmel added. “You can’t think of your restaurants at the end of the planning process. You have to pick the right restaurants and chefs. Sometimes you have to invest [money] in them. You have to be their partner.”
Hudson Yards’ dining options are all but guaranteed to be sophisticated since Keller is opening a classic American restaurant and advising on the selection of the more than 12 dining establishments slated for the one-million-square-foot development on Manhattan’s West Side. So far, José Andrés will unveil a Spanish restaurant, and Costas Spiliadis’ Estiatorio Milos will have a grill area and market.
Brickell City Centre, which in November bowed in Miami, has been feeding the city’s financial district. “There’s 100,000 hungry daytime office workers in an area that’s been underserved,” said Debora Overholt, president of retail at Swire, one of Brickell City Centre‘s developers. “A lot of malls are fairly low-traffic during the day. It’s important for us to reach those daytime office workers; we need to have dine in and carry out.
ƒapp”Visitors account for 60 percent of retail sales in Miami,” Overholt added. “They’re not cooking at home. We’ve been careful to find food and beverage uses that accommodate a full spectrum of tastes.”
Brickell’s menu includes Pubbelly Sushi, Quinto la Huella, Luke’s Lobster, Big Easy Wine Bar & Grill and American Harvest. An Italian food hall is opening later this year. “It’s a really big coup for us. The uniqueness of it and the variety it will offer in 38,000 square feet will be a big draw,” Overholt said.
With all the grub at Brickell, Saks Fifth Avenue is hoping shoppers will crave even more when its 18,000-square-foot Casa Tua Cucina, an Italian kitchen and market, opens in the fall.
Time Out Market, a gourmet food hall from Lisbon, is reportedly planning to open in Miami near Lincoln Road. Time Out received high marks from tourists who praised its Portuguese bites.
Westfield World Trade Center has more food planned, including London steakhouse Hawksmoor, and a 7,000-square-foot restaurant overlooking the Oculus from chef Daniel Humm and Will Guidara, whose Make It Nice group is responsible for the three Michelin-starred 11 Madison Park.
“A focus on food is paramount in Century City’s $1 billion makeover,” said William Hecht, Westfield’s chief operating officer. Besides Eataly, Century City’s roster of eateries will have an international bent with Javier’s Finest Foods of Mexico based on cofounder Javier Sosa’s family recipes; Din Tai Fung’s xiao long bao, or soup dumplings, and Petros, whose owner Petros Benekos is also opening Kafe for Greek tavern fare and Cafe Bugasta desserts and coffee.
“The restaurants on the way to [Los Angeles’] Westfield Century City are part of a clear strategy — to make Westfield completely relevant, social, and on trend. That means emphasizing influencer brands more than ever before, as well as making Westfield the best place to experience exciting events, entertainment and fantastic food,” Hecht said.
In Manhattan’s gritty Chelsea neighborhood, Chelsea Market still has the patina of the former Nabisco factory it’s housed in. When it opened in the Nineties, many of Chelsea’s tenants were wholesale businesses. As the neighborhood grew — and office tenants such as Google and the Food Network moved in — demand for retail space at the market rose.
Jamestown Properties, Chelsea Market’s owner, has expanded to the lower level, where a pop-up restaurant from Michelin two-star chef Laurent Gras is opening along with a grocery selling raw food.
“We’ve always had a food-centered strategy,” said Michael Phillips, Jamestown principal and president. “Nationally, I think more people are focused on food.”
Phillips is trying to create synergies between restaurants and stores in close proximity. He gave ABCV restaurant, a spinoff of ABC Kitchen at ABC Home, as an example. “It was the perfect example of food and experience,” he said. “I bought the table settings that were on the table, a dozen settings.”
At Atlanta’s Ponce City Market, a pass-through and glass wall between Williams Sonoma and chef Jonathan Waxman’s restaurant “cross-inspires” diners, who envision making the meal they’re eating using cookware from the store and tempting Williams Sonoma shoppers to try the restaurant, Phillips said.
Industry City in Brooklyn consists of a 40,000-square-foot food hall; retailers such as Design Within Reach, the WantedDesign Store, Li-Lac Chocolates and Brooklyn Brine; pop-up shops, and 10,000 square feet of communal space. “It’s a real lab for us,” Phillips said. “The coffee bar sells customized filtered coffee for $18 a cup. We have a butchers, noodles and a new distillery project rolling out.
“We work really hard to collaborate and incubate concepts,” Phillips added. “Typically, our way of investing in restaurants tends to be a percent of rent to help with build-outs.”
Restaurants and retail are not new. Barneys New York in 1993 tapped chef Marc Straussman for Freds restaurant when the retailer opened its Madison Avenue flagship. With its earthy Italian fare, the spot quickly became a go-to for the fashion industry. Giorgio Armani has built a network of restaurants and bars worldwide.
Ralph Lauren installed a coffee bar, Ralph’s Coffee, at its Polo flagship on New York’s Fifth Avenue, while its Polo Bar next door replicated the one in Paris and is one of the hottest restaurants in town.
At RH’s six-floor, 70,000-square-foot Chicago gallery, there’s “no demarcation between the store and the restaurant,” said ceo Gary Friedman, noting that a restaurant, wine vault and tasting room and espresso bar serving pastries from RH hospitality partner, restaurateur Brendan Sodikoff, keeps guests sated. “If they’re not eating, they’re drinking — customers walk around the store with a glass of wine.”
RH is planning to unveil a 14-room guesthouse in the Meatpacking District near the future site of a six-floor, 80,000-square-foot RH Gallery on Ninth Avenue. The company this month received approval from the Landmarks Preservation Commission to move forward with the plan, however, preservationists are battling to halt it in court.
Other retailers, including Uniqlo, Target and even Wal-Mart — the two mass merchants have latched onto the same Chobani Café concept — are using food to distinguish their stores from the competition. Target in October launched its TriBeCa flexible-format store with a Chobani Café serving sweet and savory yogurt creations, sandwiches, soups and coffee, while Bed Bath & Beyond’s Brooklyn unit contains Cost Plus World Market and Bay Market Kitchen, which serves locally brewed craft beer and casual American fare.
Saks struck a deal for its flagship with Paris restaurant L’Avenue, operated by the Costes family, which has a reputation for creating hotels and restaurants that fairly drip with ambiance. The Avenue Montaigne spot is said to be a luxurious experience with diners in balconies overlooking the Champs-Élysées.
Beyond food, entertainment is seen looming large on the horizon. Punch Bowl Social, described as Dave & Buster’s for Millennials, features table games, bowling, vintage arcade and karaoke. Escape Room, which combines elements of TV’s “Survivor” and brainteasers such as Stratego, chess and MindTrap, locks participants in a series of rooms and gives them an hour to escape. “It’s a white-hot concept,” Brown said.
Non-animal circuses such as Teatro ZinZanni are ripe for megamalls. Cirque du Soleil is in residence at Disney Springs in Orlando, Fla.
With all this food and entertainment going in, though, experts fear the the pendulum may be swinging too far — and that consumers actually might soon become overwhelmed by too many offerings.
“I’m concerned about how many entertainment concepts the market will be able to support,” said Brown. “The restaurant market is getting too crowded.”