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Shop and awe

Malls, operators embrace fancy food courts as sales and traffic drivers

Imagine this: You’re settling down to a nice dinner al fresco next to a blazing fireplace. Live music is playing and you have a glass of wine in your hand. On one side, the sun is setting over the Pacific Ocean. On the other, the lights of the city skyline twinkle.

And you’re in a shopping mall food court.

This will describe the new rooftop Dining Deck at Santa Monica Place, a 30-year-old mall just blocks from the beach in Santa Monica, Calif., that is scheduled to reopen in August after a
$155 million renovation.

With chef-driven, full-service restaurants sharing space with a food court that includes local fast-casual chains and a farmers market-like gathering of food purveyors, Santa Monica Place aims to up the ante among a growing number of shopping malls that are attempting to lure consumers with dining 
experiences that go beyond grabbing a bite between Nordstrom and Bloomingdale’s.

These new-and-improved food courts are being designed as dining destinations — chic but comfortable settings where guests are encouraged to linger and make a night of it.

For the restaurant operators, the new evolution of food courts typically commands significantly higher rent and an investment in decor at a time when consumers are holding tight to their wallets. Still, research indicates that consumers continued to dine in shopping mall food courts through the recession. Although sales slowed in 2009, food courts fared better than their retail neighbors. And, as consumers trickle back to shopping centers, food court sales appear to be improving ahead of the rest of the mall.

Guy Mercurio, vice president of leasing for Macerich, owner
of Santa Monica Place, said the increased focus on food in malls is key as the economy rebounds.

“Those who go to a mall to eat spend about 135 percent more time there than if they just come to shop,” he said, “and if they stay longer, they shop more.”

Mall sales appear to be on the upswing. According to the monthly survey of more than 500 malls by the International Council of Shopping Centers, or ICSC, mall sales were up 2.7 percent in February. It was the first time year-over-year sales had been positive since July 2008.

Mall food courts generated sales per square foot in February of $776 — the third-highest total after jewelry and home entertainment and electronics stores. February food court sales per square foot were up 0.3 percent, better than the sales decline of 0.6 percent year-over-year seen by fast-food restaurants inside malls and the drop of 1.7 percent at full-service restaurants.

Throughout 2009, when mall sales overall reached an estimated $49 billion, food courts performed better than their foodservice counterparts inside the shopping centers. Per-square-foot sales declined 1.7 percent at food courts during the year, compared with a 4.4-percent slide among fast-food outlets and a 6-percent decline at full-service restaurants inside malls, according to ICSC.

The new generation of food courts has emerged as mall operators across the country focus on revitalizing their existing aging properties rather than building new shopping centers.

Simon Group, based in Indianapolis, earlier this month said it’s planning a $15 million renovation of the Fashion Valley Mall in San Diego that will include the creation of a new indoor-outdoor food court. In Los Angeles, Capri Capital Partners in May also revealed plans for a $30 million upgrade of Baldwin Hills Crenshaw Plaza.

The first shot in the fancy-food-court wars arguably was fired by Westfield LLC, operator of 119 shopping centers in the United States, the United Kingdom, Australia and New Zealand.

The first of Westfield’s new dining terraces debuted in 2005 at the renovated high-end mall in Century City in Los Angeles. The sleek indoor-outdoor dining terrace includes such familiar national concepts as Panda Express and Baja Fresh Mexican Grill, as well as more exotic concepts, such as Take a Bao, a Seiki-Shi Sushi bar, and Brazilian churrascaria Ummba Grill, which has a full bar.

Seating includes various “vignettes” ranging from soft couches, counters, adult-sized tables as well as smaller versions designed for kids. Dine-in meals are served on real china with glasses and silverware, and all outlets have open kitchens.

“It’s all about food presentation as theater and freshness,” said Catharine Dickey, Westfield’s executive vice president of corporate communications.

Dickey said the Century City property experienced close to double-digit sales increases in the 24 months after the remodel.

Similar trends were seen at other Westfield properties that have been revitalized with similar upscale dining centers in recent years. Dickey said Westfield plans to continue bringing the new food court model to other properties.

David Landsberg, vice president of real estate for Panda Restaurant Group in Rosemead, Calif., said the food court evolution is spreading rapidly. “We’re seeing a real desire for major mall owners to raise the level of food courts,” he said. “They’re spending more on design and passing it on to the tenants.”

For Panda, which has about 20 percent of its units in food courts, such overhauls require careful consideration about whether the investments required would be beneficial.

Restaurant operators must evaluate the same fundamentals: whether the mall has strong anchors, good sales-per-square-foot and positive traffic patterns, he said. Post-recession, however, Landsberg also is paying closer attention to the overall vacancies within malls and the viability of resident retailers.

Jeremy Cook, vice president of real estate for Scottsdale, Ariz.-based Kahala Corp., agreed. “We as a franchisor and the franchisees have to evaluate — whether you’re selling smoothies, pizza or ice cream — how many more of that product do you have to sell to justify the increased rent?” he said.

For restaurant operator John Mahdavi, who has owned his fast-casual Charlie Kabob outlet at Santa Monica Place since 1982, the mall renovation was necessary to stay in the game.

He said all the other newly renovated mall food courts throughout Los Angeles were stealing his customers. Even before it closed three years ago for the reconstruction, traffic had slowed at Santa Monica Place, he said.

Known for his Persian-style marinated and char-grilled kebabs, Mahdavi has been focusing on his three other Charlie Kabob locations while waiting for Macerich to reopen Santa Monica Place. He said he’s thrilled about the new Dining Deck, even though his rent will almost double from about $15,000 per month in 620 square feet to more than $28,000 in 703 square feet. 

Along with Charlie Kabob, the 17,000-square-foot food court will include Chick ‘N’ Ribs, Fatburger, Manchu Wok, Pinches Tacos, Sarku Japan, Stefano’s Pizza, Sushi Itto, Great Steak, and Wetzel’s Pretzels.

Sharing the third-floor Dining Deck will be a market area with stalls for food purveyors offering artisanal breads, meats, cheeses, fruits and vegetables.

Full-service dining options will include a wine bar and beer garden hybrid called Sonoma Wine Garden and Japanese restaurant Ozumo, both created by San Francisco chef Jeremy Umland.

Multiconcept operator Richard Sandoval is planning to open the fourth unit of his Latin-Asian fusion concept Zengo, and a fourth location for his modern Mexican restaurant La Sandia.

In addition, Hong Kong-born chef Chris Yeo, operator of the four-unit Straits concept, is planning to open Xino Restaurant & Lounge. Also planned is the fourth unit of Pizza Antica by San Francisco-based Bacchus Management Group.

Mercurio of Santa Monica-based Macerich, which operates 72 malls across the United States, said Santa Monica Place will be the company’s showpiece.

“Food is the star at Santa Monica Place,” he said. “It’s a three-level center with the third floor almost dedicated entirely to food. We believe Santa Monica Place will be immensely successful.”

Contact Lisa Jennings at [email protected]

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