The trendiest stores used to be found in malls. The trendiest eateries are now located there.
Shopping malls in the United States have suffered, especially in the past ten years, from the gradual demise of department stores and the growth of internet shopping. According to Coresight Research, the number of the once-essential retail complexes has decreased from a peak of 2,500 in the 1980s to about 700 now.
However, a lot of people in the retail sector now believe that the predictions of the mall’s doom were overblown. Many Gen Z customers adore the mall experience and prefer to purchase in person. Developers’ innovative ideas have transformed vacant department shops into homes, bringing customers even closer to the establishments.
Additionally, since restaurants and bars have grown in popularity as mall attractions, landlords are investing more square footage in these establishments.
“It’s been a significant change,” stated David Henkes, senior principal at Technomic, a restaurant-focused market research business. In the past, people would go to the mall for shopping, and then they might have a bite to eat. That has been turned on its head in many ways. People are drawn there by the food selections, and you also hope they will shop a little while they’re there.
According to an October analysis, Yelp discovered that 17 out of the top 25 mall brands, as determined by consumer interest, were eateries.
According to Chris Brandon, senior vice president of leasing for eating and drinking retail at Brookfield Properties, restaurants made up only 5% to 10% of general lease space at malls run by the company ten or twenty years ago. Usually, a food court and multiple full-service restaurants are part of that. In the last few years, that has altered.
According to Brandon, there has been a remarkable surge in the past five to ten years. 20% to 30% of the entire [general leasing area] in some of our shopping complexes is devoted to food, and that is 100% intentional.
The 129 malls in Brookfield’s portfolio include First Colony Mall in Sugar Land, Texas; Christiana Mall in Newark, Delaware; and Tysons Galleria in McLean, Virginia. More than 540 full-service restaurants and almost 2,000 fast-casual restaurants are among its mall restaurant tenants.
More than the food court
The first successful mall food court in the United States was established on the second level of the Paramus Park shopping mall in New Jersey more than 50 years ago. Ten years later, food courts had established themselves as a mainstay of American shopping centers, contributing to the growth of franchises such as Auntie Anne’s, Mrs. Fields, and Sbarro.
Additionally, full-service restaurants like California Pizza Kitchen, TGI Fridays, and the Cheesecake Factory established themselves as mall fixtures.
However, consumers now have more options than just those well-known brands. Malls now provide a far greater range of dining options, including local chefs, regional eateries, and new bubble tea franchises.
According to Henkes, malls typically seek out more upscale establishments, such as what is known as a contemporary casual restaurant. Although it’s not really fine dining, it’s a step up from standard casual.
These modern casual dining establishments provide high-end selections like sushi, steakhouses, and Korean barbecue. A lunch at these new mall restaurants will probably cost at least $30 per person, while prices vary.
For James Cook, head of retail research for real estate firm JLL, the expansion in dining options offers an experience that s familiar but still elevated.
The distinction that I make is that I m not necessarily dressing up nice to go to a mall, he said. This is a restaurant where I could pay more money, but not necessarily feel like I have to wear a suit jacket or anything like that.
The pandemic also made malls a more attractive option to restaurateurs.
During lockdowns, operators saw their traffic disappear. Even when consumers started dining out and commuting again, restaurants in central business districts still struggled to attract diners, given the new hybrid workforce and other changes to consumer behavior. But malls bounced back.
Even today, foot traffic to suburban malls is back above pre-pandemic levels, where in the cities and the city centers, foot traffic has not returned, JLL s Cook said.
That foot traffic also appeals to emerging chains that are looking to expand quickly. Restaurant companies likeSweetgreenand Mendocino Farms have opened new locations in malls as they seek to grow their sales and brand awareness.
The one thing that our properties can offer is scale, and scale really quickly. If they re used to doing X in their food truck, now they re doing X times two or three, Brandon said.
For example, Din Tai Fung, a Taiwanese restaurant chain, has honed in on malls for its U.S. expansion, according to Alison Lin, Yelp s head of restaurants. Upcoming locations will open in Scottsdale Fashion Square in Arizona and Brea Mall in Southern California, according to the chain s website. Din Tai Fung ranked second in Yelp s report on most popular mall brands by consumer interest. (Din Tai Fung declined to comment).
The new food court? Food halls
As malls devote more space to food and drinks, food courts have been supplemented by a newer, more upscale alternative: food halls.
Like food courts, food halls offer an array of dining options, usually from stalls, with general seating available once diners have purchased and picked up their food and drinks.
But unlike food courts, the halls typically offer more expensive options, usually touting ties to local chefs and promising more interesting cuisine than that found at a food court. While a food court sells fare from national chains, food halls typically stick to local vendors that have few locations.
A food court is to give you a burger, fries or a slice of pizza to keep you shopping longer at the mall, Cook said. A food hall is part of the experience.
Oftentimes, food halls feature multiple vendors. But Eataly is one exception.
The Italian chain sells itself as a trip to Italy, without the plane ride. Its large locations feature full-service restaurants; artisanal groceries; quick-service counters that sell gelato, pizza and espresso; along with cooking classes. Eight of Eataly s 13 U.S. locations are in malls, with more on the way next year.
Eataly s North American CEO Tommaso Bruso joined the company last year after two decades in the fashion industry, leading mall brands like Benetton and Diesel.
People go to the mall for shopping, but also they go for a cultural experience, Bruso said, adding that Eataly has found success with consumers both in and outside of malls.
But food halls haven t won over everyone. Brandon said that food courts have performed better for Brookfield s malls. He pointed to Chick-fil-A and Panda Express as two tenants that typically see strong sales in food courts. In 2023, the average annual revenue for amall location of a Chick-fil-A was $4.5 million; the chain s best-performing mall restaurant raked in nearly $19 million in annual sales, according to franchise disclosure documents.
The cheesecake factor
Even with more competition than ever for shoppers, The Cheesecake Factory has managed to stay on top. And it s showing how restaurants can help a broader mall.
The chain, known for its comprehensive menu and towering columns, was ranked No. 1 in Yelp s mall brand report.
It s been a rocky year for the company. Like many restaurants, the chain has struggled to attract diners, many of whom have pulled back their restaurant spending. In its latest quarter, the company s same-store sales grew just 1.6%. Activist investors have also been putting pressure on the company to spin off its smaller brands, like North Italia. (The Cheesecake Factory declined to comment.)
Still, the company is outperforming the broader casual-dining category, based on metrics provided by industry tracker Black Box Intelligence.
Shares of the Cheesecake Factory have risen 43% this year, outstripping the S&P 500 s gains of 27% over the same period.
While fellow mall staples like California Pizza Kitchen and TGI Fridays have filed for Chapter 11 bankruptcy in recent years, the Cheesecake Factory has escaped the same fate.
And it s maybe even helped its landlords finances. Enclosed malls with a Cheesecake Factory location are more likely to be current on their loan payments, according to aMoody s Analytics reportfrom 2023. Author Matt Reidy, director of commercial real estate economics for Moody s, said it was more likely the result the company s strong site selection, rather than cheesecakes saving a mall.
Still, Reidy said having one of the restaurant s locations helps. And Brookfield s Brandon agrees.
My god, are they productive. It s pretty incredible what they re able to do, and they re a valued partner of ours. We have dozens of leases with them, and we truly value them as a tenant, he said.
More from CNBC:
-
What the top 75 college sports programs are worth
-
Putin admits Russian inflation is an alarming signal and the economy is overheating
-
Fed s hawkish signal sparked gold jitters but analysts see support for the precious metal in 2025
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!