Welcome to Wednesday bites, people. We had a reader request come in that looked something like this:

Now, 3 things right off the bat:

1. If you happen to enjoy food halls AND/OR current economic news, then this email is for you.
   

2. And while we’re not judging you for liking food halls, our reader certainly is.
   

3. …but we’re also judging you…a little bit.

   1. It depends, are you going for Sushi at a food hall? Or like a burger? Burger is fine, but sushi at a food hall? I mean really? In Louisville? Really?

ONTO THE EMAIL

Food Halls: A Proliferation in 3 points

Food halls seem to be the standard for a weekend hangout now.

Whether it’s your in-laws coming into town or a close high school friend whose visit surprisingly became awkward for no reason, we’re all flocking to these culinary capitals like rich people from Des Moines (sorry, Tatum) flock to a cruise ship.

1. Wait…these aren’t a fad?

• There’s 350+ food halls in the US with a 100+ more opening by end of 2024. Mostly in the suburbs.
  

• Why is that happening? Work from home, largely. Customers are demanding a mix of dine-in takeout options and meal time boundaries have been blurred like never before (an effect of the pandemic).

2. They’re economically viable

David Chang said starting a restaurant is basically taking a large pile of money and lighting it on fire.

Food halls have been a different story. Developers have been relying increasingly on the power of diversification in a high interest/low commercial RE market.

Here’s why food halls are buzzing:

• Rent costs are lower at food halls: Spaces are easier to fill, which leads to lower operating costs on the tenants’ side
  

• Multiple tenants in one space: Capitalization on the property is de-risked. If one tenant goes under, there’s a bunch more paying rent and making the space work.
  

• ROI multiplier? Destination eating: Food halls become an entity for the masses hanging out for an extended period of time. That attracts additional commerce, which raises price per sq. ft.
  

3. “It’s the economy, stupid”: A half-assed analysis

The food hall is just a very efficient vehicle for commerce right now. The fed raised rates something like 10+ times between last year and this year.

Add after-effects of the pandemic, and the result was a 57% decrease in commercial investment through Q1 of 2023.

• “Foolproofness”: In a market where it’s been tough to find commercial investors, the aggregate dining space just seems more appealing than anything else out there (would YOU invest in office space right now?).
  

• Tenant appeal: Rents are always rising, Labor costs are always soaring. Restaurant chains have started investing into smaller footprints. Food halls offer a salve to the margins of restaurant operators but keeping/maintaining economies of scale.
  

• Increased takeout habits: Again, leaner operating budget with ghost kitchens, something food halls can accommodate.

Scrapped Material: notes on takeout trends

• Streamlined Restaurant Design: You remember when Mcdonald’s used to be the embodiment of what a psilocybin trip looks like in 2023? Well they don’t look like that anymore, and takeout is a possible factor behind those renovations.

We’re thinking it’s easier to design a smaller footprint store and make it look like an upscale vending machine with minimal investment than the full-service monstrosity we used to experience.

• Robotics: Remember when we talked about robots last week? Well, aside from investing in technology to trim-down staff, companies might also be looking to do it to boost productivity. Delivery apps operate at scale, and when you have 56 orders to fulfill in the next 20 minutes, you end up needing help.

What AI made this week

Real-life event this week:

Have a great week!

Ahmed and Peter