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The food retail industry in the U.S. is in a period of innovation and reinvention. Many food service trends we’ve seen pop up in the last decade, like food trucks and their more permanent food hall contingent, are not only sticking around but rising in popularity. We see them continuously driving growth in an otherwise challenging economic environment. Today, there is no hotter trend or more aggressive expansion in the food retail sector than food halls.

These enclaves of independently-owned food carts or restaurant chains are trendy and profitable. Why food halls? Until recently, they were seen as “a strange hybrid of transit-oriented development and tourism-based retail.” Associated more with an uninspiring mall court, they were places set up for convenience and not a dining experience. They certainly weren’t on anyone’s culinary map. That has changed.

Food halls now feature hyper-local chains, pop-ups, and food carts, all emphasizing a unique style of cuisine, local flavor, and/or an interesting theme. You can thank both “foodie culture” and millennial adoption for the resurgence of this type of dining. There is room for many different food trends to be housed within one food hall, which is why you’ll find lots of menus with descriptions like “sustainability,” “farm-to-fork,” and “slow food.”

Some of these food halls are especially killing it, profits-wise. So, what’s their secret sauce?

First off, we have New York City, the food hall capital of the world. With over 10 separate food halls, and upscale, celebrity-chef driven eateries right next to more casual fast food offerings, NYC has cornered the market on both quality and authenticity.

It doesn’t hurt that a few of its food halls were opened by foodie culture celebs, like the Todd English Food Hall (modeled after the iconic Harrods Department Store Food Hall in London), housed inside the Plaza Hotel or Italian marketplace Eataly. Apart from name recognition, here’s why they’re setting the food hall gold standard:

  • Upscale European food hall model
  • Quality, authentic food offered by a mix of vendors
  • Offerings ranging from Michelin-starred chefs to unknown startups
  • Artisanal food vendors selling unprepared foods (cheeses, gourmet meats, chocolates)

In 2016, New York City had 18 existing food hall projects, either completed or in the works. In addition to these perennials, it also has seasonal food halls like Brooklyn’s Smorgasburg. There is also the trend of the “mini hall,” where the bottom floor of an office building is filled with food vendors, which is now exploding nationally.

New York City currently accounts for more than 25.4% of the entire U.S. food hall projects inventoried in 2016, so it’s no wonder they are leading the national charge.

Establishments like Chelsea Market, offer more than just its dozen sit-down restaurants and 35 food vendors – they are having just as much of an impact with non-food related retail (including big chains like clothing and homewares store Anthropologie). In fact, their success here suggests what may be a future model for many urban retail projects.

New York also corners the market on setting up food halls in the most intelligent locations, full of foot traffic and tourists. Grand Northern Food Hall is housed in the same building as Manhattan’s iconic Grand Central Terminal, which has been a focal point for NYC commuters since 1871. Boasting over 82 million visitors annually, it’s no wonder it’s one of the nation’s largest and most successful food hall venues.

San Francisco is another city that takes great advantage of commuter traffic. The Ferry Building has a food hall/transit hub where all ferries come in and out of the city, but is also in a primo location at the end of Market street, where dozens of buses, cable cars, and foot traffic go past.

This historic building dates back to 1898, when ferries were the main mode of transport to cross the Bay (now the Golden Gate and Bay Bridge serve that purpose). Now considered to be one of the best modern food halls in the US, it houses 40 restaurants and specialty food purveyors, from the hyper-local Hog Island Oyster Company to popular sit-down Vietnamese restaurant, The Slanted Door. It also has a weekly farmer’s market. Between location, tourist destination, and transit hub, it’s no wonder it was ranked Food + Wine magazine’s #1 in their list of the World’s Top 25 Food Markets.

Philadelphia’s Reading Terminal market is the epitome of the more classic style of American food hall. It has the historical clout of being built on the site of an open air market dating back to 1859, with a rail terminal taking up the space later in 1893. Although most of its 60 vendors are on month-to-month leases, there has been very little turnover in the past 20 years – a testament to its excellent location. It’s located right under the state-of-the-art Philadelphia Convention Center in the heart of downtown, making it a top tourist draw. Food-wise, their vendors trend more toward street and comfort foods, with some Pennsylvania Dutch offerings to add local flavor.

The commonalities emerging from these top American food hall examples are easy to identify:

  • Location, location, location (housed in or near a tourist destination or transit hub)
  • Diversity of vendor mix (generally street food to celeb-chef concepts)
  • Quality (both in building design and food)

With new projects being added at the rate of one per week, and exploding growth expected into 2019, it’s a great time for restaurant entrepreneurs to consider becoming an “anchor tenant” at a food hall. Many urban, high-rise developers are including food halls (“mini” or “bite-size”) on the ground floor as part of their plans.

Renting space in a food hall is significantly cheaper than a brick-and-mortar restaurant. The amount of foot traffic going through them also means that proprietors stand to make a lot more money. Lower operations cost and higher profits? Sounds good to us!