{"id":471620,"date":"2024-02-27T09:00:52","date_gmt":"2024-02-27T14:00:52","guid":{"rendered":"https:\/\/commercialobserver.com\/?p=471620"},"modified":"2024-10-15T19:56:25","modified_gmt":"2024-10-15T23:56:25","slug":"new-york-food-halls-closing-opening","status":"publish","type":"post","link":"https:\/\/commercialobserver.com\/2024\/02\/new-york-food-halls-closing-opening\/","title":{"rendered":"New York’s Hunger for New Food Halls Has Likely Peaked"},"content":{"rendered":"

The demise of a once-teeming Lower East Side food hall has startled New York developers and restaurateurs, raising questions of whether a model for 21st century dining has a future in the city.<\/span><\/p>\n

Essex Crossing\u2019s owners announced in early February they would pull the plug<\/a> on the Market Line on April 1 after months of dwindling customers and paltry sales. Many of the 30 vendors in the 150,000-square-foot food court below 115 Delancey Street have already shuttered and moved out<\/a> of their stalls. Other tenants in Essex Crossing, including city-operated Essex Market vendors and the James Beard Award-winning restaurant Dhamaka, are expected to stay put.\u00a0<\/span><\/p>\n

The development team, a joint venture of Taconic Investment Partners, L+M Development Partners and BFC Partners, has been mum about what will fill the basement floor of their 1.65 million-square-foot, mixed-use complex. A spokesperson for the venture said in a statement that the owners were \u201cevaluating uses for the underground space that will be sustainable for the long term\u201d and did not respond to further questions.<\/span><\/p>\n

Don\u2019t bet on another food hall taking its place.<\/span><\/p>\n

\u201cI think there\u2019s going to be a recalibration because the pandemic threw a lot of businesses into flux,\u201d said Andrew Rigie, executive director of the New York City Hospitality Alliance, a trade association that represents restaurants. \u201cSome have been more successful than others, but there\u2019s an opportunity to reimagine what the future of food halls are.\u201d<\/span><\/p>\n

At first, New Yorkers couldn\u2019t get enough of the fast-casual communal dining option.\u00a0<\/span><\/p>\n

In the four years between the groundbreaking of the $1.7 billion<\/a> site and the Market Line\u2019s launch in 2019<\/a>, the number of food halls in North America tripled from 71 to 223, according to a Cushman & Wakefield 2023 report<\/a>. Foodie blog Eater counted 30 in New York City alone by 2018.<\/span><\/p>\n

During that time, several well-heralded food halls opened throughout the city, giving the Market Line unexpected competition. The most significant one was DeKalb Market<\/a>, the crown jewel of City Point, the largest mixed-use development in the city at the time, which opened\u00a0 in Downtown Brooklyn in 2017. Urbanspace<\/a> debuted at 570 Lexington Avenue in Midtown East the following year.<\/span><\/p>\n

Then the floodgates opened and the market appeared to be headed toward its peak<\/a>. A half-dozen other food halls opened during the same year<\/a> as the Market Line, including Dumbo\u2019s Time Out Market<\/a>, The Deco off Times Square, 8SIA in Midtown East, Astoria\u2019s World Artisan Market, Mercado Little Spain<\/a> at Hudson Yards and Chelsea Local, an expansion of the original Chelsea Market.\u00a0<\/span><\/p>\n

Another wave of fast-casual dining options arrived after the pandemic, including Midtown East\u2019s The Hugh<\/a> in 2021, the Williamsburg Market<\/a>, Midtown\u2019s Urban Hawker<\/a>, the Tin Building<\/a> at South Street Seaport in 2022, and the Tangram mall\u2019s Food Hall in Flushing, Queens, in 2023.<\/span><\/p>\n

Today there are 367 food halls across North America and another 158 in the development pipeline, Cushman & Wakefield brokers said. Some are still struggling<\/a> after the pandemic. From March 2020 through February 2023, 22 food halls closed and dozens more have temporarily closed in order to get new tenants or reinvent themselves, the C&W report<\/a> said.<\/span><\/p>\n

But Phil Colicchio, who tracks food hall trends as an executive managing director at C&W, insisted he is still getting inquiries from across the country on food hall concepts and is consulting on 47 new projects.<\/span><\/p>\n

\u201cI gauge the industry by the number of calls we get, and we\u2019re getting a lot,\u201d he said. \u201cDevelopers are looking for a more intelligent structure and more intelligent design. The food hall in New York City is really still a baby when you think about it.\u201d\u00a0<\/span><\/p>\n

Essex Crossing\u2019s development team had high hopes for their subterranean site when it opened<\/a> five years ago.\u00a0<\/span><\/p>\n

They worked with architects SHoP and Beyer Blinder Belle to plot out the two-level marketplace, and Essex Crossing would win an American Institute of Architects design award in 2021. The developers also lured an eclectic mix of restaurants to the indoor plaza to complement Essex Market\u2019s longtime grocery vendors while reflecting the neighborhood\u2019s immigrant heritage.\u00a0<\/span><\/p>\n

Its restaurant offerings received<\/a> buzzy<\/a> reviews<\/a>, and The New York Times<\/i> declared the complex the anti-Hudson Yards<\/a> for its affordable mix of dining options, open layout and easy access to transit.<\/span><\/p>\n

But there were signs it wasn\u2019t going to be easy.<\/span><\/p>\n

Market Line\u2019s underground location within Essex Crossing was a challenge to attract customers because the food hall was essentially hidden beneath another food attraction. Restaurants have typically avoided below-ground or second-floor locations in New York because customers prefer air and light when they eat.<\/span><\/p>\n

\u201cYou don\u2019t see Apple putting a store in the basement,\u201d Trip Schneck, an executive managing director at Cushman & Wakefield, said. \u201cYou still want store frontage, foot traffic and visibility. There aren\u2019t a lot of great precedents for non-street-level food halls in the United States.\u201d<\/span><\/p>\n

Owners also charged vendors a top-of-the-market rent, and the stalls were expensive to build out. The rent was also structured in an unusual way, with a high base rent and a modest percentage based on sales on top of that. Other food halls have a much lower base rent, if there\u2019s one at all, and a higher percentage rent, brokers said.<\/span><\/p>\n

Colicchio and Schneck, who did not consult on the Market Line project, believe Essex Crossing\u2019s owners curated the space with the right mix of vendors but didn\u2019t forecast enough revenue to meet their expenses and set rents too high as a result.<\/span><\/p>\n

\u201cIn speaking with vendors, I don\u2019t think ownership was quite prepared as it relates to the operating expenses that are consistent with food hall operation,\u201d Colicchio said. \u201cWhen you combine rents at the higher end of the market and a lot of small tenants in a subterranean environment, you\u2019re starting off with a pretty difficult set of circumstances.\u201d<\/span><\/p>\n

Reps for the owners did not respond to additional questions.<\/span><\/p>\n

When the pandemic struck in March 2020, the entire Essex Crossing market complex was forced to shut down. But the Market Line food hall remained out of service for another 16 months<\/a> because it didn\u2019t have an outdoor space to serve customers, while nearby restaurants reopened later that summer thanks to their makeshift dining sheds<\/a>.\u00a0<\/span><\/p>\n

By the time the Market Line finally came back in July 2021<\/a>, people\u2019s dining habits had changed. Many New Yorkers still worked from home, which dried up the lunch orders that many Manhattan food halls depend on. Those who went to the Lower East Side at night wanted to socialize and linger at restaurants or bars with outdoor spaces.\u00a0<\/span><\/p>\n

\u201cIt is far east and it\u2019s in a more residential area where people are going out to bars and restaurants for nightlife or a full-service dining experience,\u201d Rigie said. \u201cFor the most part,\u00a0 <\/span>you\u2019re picking up a quick breakfast or lunch at a food hall.\u201d<\/span><\/p>\n

The development team also had a challenge reintroducing the market to the public when it reopened. Some retail brokers said the market\u2019s social media presence was invisible and there was little outreach to potential tenants to fill vacancies. Programming on the ground floor, whether it was a book talk, trivia nights, or a DJ set, was also rare. It didn\u2019t help that different sections of the plaza had different operating hours and most of the site closed by 8 p.m.<\/span><\/p>\n

Colicchio believes a decent bar scene or some other type of consistent entertainment programing could have kept more customers at the space.<\/span><\/p>\n

\u201cA food hall is not an environment for lingering the way a white tablecloth restaurant would be, and lingering is important for a successful food hall,\u201d he said.<\/span><\/p>\n

Essex Crossing owners said earlier this month they provided their vendors rent abatements and deferrals for several months, but some tenants packed up at the beginning of 2024. Taqueria Nixtamal, Nom Wah Tea Parlor and Veselka<\/a> were among the early departures. Then on Feb. 6, its anchor tenant, the craft beer hall The Grand Delancey, announced it would cease operations<\/a> in two weeks.\u00a0<\/span><\/span><\/p>\n

Two days later, the Market Line\u2019s closing became official<\/a>.<\/span><\/p>\n

\u201cThey were never able to cement themselves in the hearts and minds of New Yorkers,\u201d said one real estate insider who worked on the project. \u201cIt hadn\u2019t become a destination, and that\u2019s no fault of the developers. It was the timing of the opening and oversaturation of the food halls. The ones that survived were already well known among the citizenry.\u201d<\/span><\/p>\n

One thing is for sure, the Market Line space won\u2019t be empty for long. Essex Crossing\u2019s development team has already begun taking pitch meetings with retail brokers about what could fill their lower floor, sources said.\u00a0<\/span><\/p>\n

Some brokers believe the owners will shift toward the experiential retail<\/a> increasingly filling shopping complexes across the country. That could include tech-infused mini golf concepts like Puttshack, an escape room center, bocce or shuffleboard courts, or the F1 Arcade racing sports bar popular in Boston and Washington, D.C.<\/span><\/p>\n

\u201cThis ability to create competitive socializing events in spaces did not exist five years ago in the way that it exists now, and they\u2019re growing like weeds,\u201d Colicchio said. \u201cThere is an absolute desire among Gen Z guests and consumers to be out and in environments where they can have fun, meet people and eat, and competitive association environments are perfect for that.\u201d\u00a0<\/span><\/p>\n

Whatever retail space gets added will have some company. Essex Crossing\u2019s owners already leased<\/a> Vital, a climbing gym with three other locations in the city that also provides yoga, cycling and fitness classes, at 182 Broome Street. The gym will take up three floors of the space and is expected to open this spring.<\/span><\/p>\n

Colicchio has faith in the future of fast-casual food halls as young people get back in the habit of going out. The Market Line may have been a victim of poor timing more than anything, he said.<\/span><\/p>\n

\u201cThey did a lot of things right and they did them for all the right reasons,\u201d Colicchio said. \u201cI do believe this was a difficult moment in time.\u201d\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The demise of a once-teeming Lower East Side food hall has startled New York developers and restaurateurs, raising questions of whether a model for 21st century dining has a future in the city. Essex Crossing\u2019s owners announced in early February they would pull the plug on the Market Line on April 1 after months of […]<\/p>\n","protected":false},"author":177935167,"featured_media":471624,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"apple_news_api_created_at":"2024-02-27T14:01:03Z","apple_news_api_id":"2567ec7a-6d23-4501-90e1-dd125e2bee7a","apple_news_api_modified_at":"2024-02-27T14:01:04Z","apple_news_api_revision":"AAAAAAAAAAD\/\/\/\/\/\/\/\/\/\/w==","apple_news_api_share_url":"https:\/\/apple.news\/AJWfsem0jRQGQ4d0SXivueg","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"middle","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"_ef_editorial_meta_paragraph_assignment":"","_ef_editorial_meta_date_first-draft-date":"","_ef_editorial_meta_checkbox_needs-photo":"","_ef_editorial_meta_number_word-count":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"That big trend in #food halls in #NYC? It's over. @aaronshortstory picks up the scraps.","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false},"categories":[231408,347383099,9548,347383050,425196709,598359235],"tags":[425193552,425196656,425196831,598387130,425199118,598387131,598340710,598339455,7993508,598348244],"industry_type":[598394819,598394851,598394814],"company":[124645402,425196886,46959970,598378363,1058592],"market":[423636225,425197610,425197606],"sponsored":[],"coauthors":[425200106],"class_list":{"0":"post-471620","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-channel","8":"category-development","9":"category-features","10":"category-leases","11":"category-neighborhoods","12":"category-tenant-talk","13":"tag-dekalb-market","14":"tag-essex-crossing","15":"tag-hudson-yards","16":"tag-mercado-little-spain","17":"tag-phil-colicchio","18":"tag-the-hugh","19":"tag-the-market-line","20":"tag-time-out-market","21":"tag-tin-building","22":"tag-trip-schneck","23":"industry_type-hospitality","24":"industry_type-restaurants","25":"industry_type-industry","26":"observer_company-bfc-partners","27":"observer_company-cushman-wakefield","28":"observer_company-lm-development-partners","29":"observer_company-taconic-partners","30":"observer_company-urbanspace","31":"market-new-york-city","32":"market-manhattan","33":"market-lower-east-side"},"acf":{"alternative_og_image":""},"apple_news_notices":[],"parsely":{"version":"1.1.0","canonical_url":"https:\/\/commercialobserver.com\/2024\/02\/new-york-food-halls-closing-opening\/","smart_links":{"inbound":0,"outbound":0},"traffic_boost_suggestions_count":0,"meta":{"@context":"https:\/\/schema.org","@type":"NewsArticle","headline":"New York’s Hunger for New Food Halls Has Likely Peaked","url":"http:\/\/commercialobserver.com\/2024\/02\/new-york-food-halls-closing-opening\/","mainEntityOfPage":{"@type":"WebPage","@id":"http:\/\/commercialobserver.com\/2024\/02\/new-york-food-halls-closing-opening\/"},"thumbnailUrl":"https:\/\/commercialobserver.com\/wp-content\/uploads\/sites\/3\/2024\/02\/The-Grand-Delancey_JJS0185-WEB.jpg?quality=80&w=150","image":{"@type":"ImageObject","url":"https:\/\/commercialobserver.com\/wp-content\/uploads\/sites\/3\/2024\/02\/The-Grand-Delancey_JJS0185-WEB.jpg?quality=80"},"articleSection":"Features","author":[{"@type":"Person","name":"Aaron Short"}],"creator":["Aaron Short"],"publisher":{"@type":"Organization","name":"Commercial Observer","logo":""},"keywords":["dekalb market","essex crossing","hudson yards","mercado little spain","phil colicchio","the hugh","the market line","time out market","tin building","trip schneck","leases","tenant talk","channel","development","features","neighborhoods","hospitality","restaurants","industry","bfc partners","cushman & wakefield","l+m development partners","taconic partners","urbanspace","tacitelli","new york city","manhattan","lower east side"],"dateCreated":"2024-02-27T14:00:52Z","datePublished":"2024-02-27T14:00:52Z","dateModified":"2024-10-15T23:56:25Z"},"rendered":"