GlobeSt.com: We all know what a food hall is, but how does it work from a real estate perspective?

Crocenzi: Actually, the commercial real estate industry has yet to come up with a clear definition of a “food hall,” and I'm seeing a variety of real estate models depending on the size and location of the project. The most common model includes the landlord building out all of the common areas and restaurant “stalls”, and then leasing them to individual operators with a base versus percentage rent structure. But we are also seeing an emergence of a new business model whereby the landlord leases the entire space to a master operator, who in turn manages the food hall and makes all the merchandising decisions in collaboration with the property owner for a fee. That master operator may also have a controlling interest in the individual vendors. A prime example is Michael Mina's “THE STREET” at the International Market Place in Honolulu. I would expect this trend to continue to grow as more landlords realize they do not have the time, resources and expertise to curate their own food hall.

GlobeSt.com: Are these lease deals structured differently that standard restaurant leases?

Crocenzi: Yes, the deal structure tends to be very different than typical retail or restaurant-related transactions, in that they are typically short-term leases (one to three years) and typically inclusive of utilities, trash removal, etc. The spaces are very small, typically 300- 500 square feet, and command a very high rent per square foot because the tenant is only leasing the kitchen space. Tenants often share overhead expenses such as prep space and large appliances like refrigerated storage, freezers and ice machines. The chefs view them as a less risky, more affordable way to get in business, and the landlord benefits by having the flexibility to switch out underperforming vendors.

GlobeSt.com: Where are you seeing the most demand for food halls?

Crocenzi: They are the retail amenity of choice for urban, high-rise office or residential projects in densely populated areas; however, in recent years they are becoming increasingly popular in suburban locations as an anchor tenant in regional shopping centers and mixed-use projects.

GlobeSt.com: Can a market accommodate more than just a handful of food halls?

Crocenzi: That's a good question. I would say that depends on the market. New York City has 17 existing and at least 7 more planned or under construction. While there is no doubt that as the popularity of food halls increases, market saturation will eventually be an issue. You'll see plenty of them proposed or open over the next couple of years, some as a way to fix a broken shopping center, revive an economically challenged area, or a solution to fill a difficult space. These landlords think adding more food and beverage will save them.

GlobeSt.com: Is this a fad or a new retail niche?

Crocenzi: I would say the trend has only really just begun. Using a baseball analogy, we're still in the early innings. Food halls, market halls- however you choose to define them- they are an outcome of a bigger trend, and that's the evolution of modern dining. Putting a critical mass of local food businesses within an aesthetically interesting space where lots of people congregate is a winning formula.

Food halls are the hottest new trend in retail. Restaurants and unique eateries have been a growing driver in the retail market, as they tend to be more Internet resistant than brick-and-mortar retailers. Food halls are the next evolution: properties packed with destination eateries. It is too soon tell if this is just a fad or a long lasting retail phenomenon, but we sat down with expert James Crocenzi, an SVP from CBRE, for an exclusive interview. Here, he tells all about the trend and where it is heading.

GlobeSt.com: What is driving the rise in food halls?

James Crocenzi: There are many reasons for their surging popularity. For one, there's a real and growing appetite for more casual, reasonably priced, yet good quality meal options in an elevated experience. Americans are eating out more than ever before and, according to our research, are now spending more money dining out than they are in the grocery store. Plus, the rise of “foodie culture” over the past 10 or 20 years has been a factor. It was brought on by the multiple food-focused cable channels and shows like Top Chef and Food Network and the impact of social media and apps like Yelp and Instagram that allow people to share their dining experiences.

GlobeSt.com: We all know what a food hall is, but how does it work from a real estate perspective?

Crocenzi: Actually, the commercial real estate industry has yet to come up with a clear definition of a “food hall,” and I'm seeing a variety of real estate models depending on the size and location of the project. The most common model includes the landlord building out all of the common areas and restaurant “stalls”, and then leasing them to individual operators with a base versus percentage rent structure. But we are also seeing an emergence of a new business model whereby the landlord leases the entire space to a master operator, who in turn manages the food hall and makes all the merchandising decisions in collaboration with the property owner for a fee. That master operator may also have a controlling interest in the individual vendors. A prime example is Michael Mina's “THE STREET” at the International Market Place in Honolulu. I would expect this trend to continue to grow as more landlords realize they do not have the time, resources and expertise to curate their own food hall.

GlobeSt.com: Are these lease deals structured differently that standard restaurant leases?

Crocenzi: Yes, the deal structure tends to be very different than typical retail or restaurant-related transactions, in that they are typically short-term leases (one to three years) and typically inclusive of utilities, trash removal, etc. The spaces are very small, typically 300- 500 square feet, and command a very high rent per square foot because the tenant is only leasing the kitchen space. Tenants often share overhead expenses such as prep space and large appliances like refrigerated storage, freezers and ice machines. The chefs view them as a less risky, more affordable way to get in business, and the landlord benefits by having the flexibility to switch out underperforming vendors.

GlobeSt.com: Where are you seeing the most demand for food halls?

Crocenzi: They are the retail amenity of choice for urban, high-rise office or residential projects in densely populated areas; however, in recent years they are becoming increasingly popular in suburban locations as an anchor tenant in regional shopping centers and mixed-use projects.

GlobeSt.com: Can a market accommodate more than just a handful of food halls?

Crocenzi: That's a good question. I would say that depends on the market. New York City has 17 existing and at least 7 more planned or under construction. While there is no doubt that as the popularity of food halls increases, market saturation will eventually be an issue. You'll see plenty of them proposed or open over the next couple of years, some as a way to fix a broken shopping center, revive an economically challenged area, or a solution to fill a difficult space. These landlords think adding more food and beverage will save them.

GlobeSt.com: Is this a fad or a new retail niche?

Crocenzi: I would say the trend has only really just begun. Using a baseball analogy, we're still in the early innings. Food halls, market halls- however you choose to define them- they are an outcome of a bigger trend, and that's the evolution of modern dining. Putting a critical mass of local food businesses within an aesthetically interesting space where lots of people congregate is a winning formula.