Food Hall Investment Statistics, Part 1
Statistics that prove a food hall or marketplace is a better and safer investment than other types of restaurants include lower failure rates, more foot traffic, lower operational costs, and shorter lease terms.
Low Failure Rates
- According to Garrick Brown, vice president of retail research for Cushman & Wakefield, "food halls are attractive due to low failure rates."
- When Cushman & Wakefield tracked the openings and closings of food halls over a two-year period (2016-2018), just two food halls had failed.
- This failure rate is significantly lower than the 30% failure rate of restaurants in their first 18 months.
Higher Rents Offset by More Traffic and Lower Operational Costs
- Although food halls typically charge higher rents than standalone restaurants, the foot traffic that food halls see and the lower operational costs offset the higher rents.
- Food hall vendors typically pay between 20% and 25% of their income on rent compared to between 6% and 10% for conventional restaurateurs.
- However, as one food hall vendor found, the foot traffic that food halls generate makes up for the more expensive rents.
- That food vendor stated, "Here I am paying about $120 per-square foot annually for my 300 square feet of space. That’s about $36,000 per year. If I would have opened my own standalone restaurant I would have been looking at rents probably in the $60 per-square-foot range for about 2,000 square feet. That would have been $120,000 per year and it would have been for space that generates nowhere near the traffic of this place. I would not have been able to afford that, but here I am thriving."
- Additionally, higher rents for food halls are also "more than offset by lower operational, labor and common-area costs."
Shorter Lease Terms
- Typically, food hall lease terms are shorter than those for standalone restaurants because "the landlord wants flexibility to rotate vendors in and out."
- Food hall leases average between one and three years compared with the 10-year standalone leases.
- The shorter lease not only helps landlords, though. It can also help tenants because if traffic isn't as good as expected, they are not stuck in a bad situation for the long term.
- A study on food halls by Matthews indicated that the shorter leases make food halls less of a risk than traditional restaurants.