Food Halls’ Draw Has Always Been Foot Traffic, But Coronavirus Changed That

Jennifer Echeverri owned and operated Habana Cuba for 16 years on Race Street in San Jose. But when she leased space at the SoFA Market on First Street in 2018, she saw it as a special and exciting new location for her restaurant.

Food halls—where restaurants and retailers set up shop shoulder-to-shoulder in a single building and share things like seating and security—offer a built in promise of one of the most important industry stats: high foot-traffic. But a year into the pandemic that has forced customers inside their homes, Echeverri is unsure what the future holds for her restaurant or for other small businesses in food halls like SoFA Market.

“I really only thought it would be a month at most and then life would get back to normal—and it didn’t,” Echeverri said. She let go of four of her six employees within the first few weeks of the shutdowns.

Food halls have become a beacon of American consumerism of the recent past, as retail hotspots like Manhattan’s Eataly, Los Angeles’s Grand Central Market, Milwaukee’s Public Market and San Francisco’s Ferry Building Marketplace sprung up.

Even shopping malls, like Unibail-Rodamco-Westfield’s Valley Fair Mall on the border of San Jose and Santa Clara traded the tried-and-true food court aesthetic shoppers have known for decades for food hall-esque eating districts in its $1.1 billion overhaul, which opened just as the pandemic hit Silicon Valley.

San Jose’s first food hall, San Pedro Square Market, arrived downtown in 2011; the SoFA Market followed in 2015.

Businesses inside both spaces trade higher per-square-foot rents compared to a stand-alone building in exchange for the consistent flow of customers. Until last year, that trade was working out. Now their restaurants and retailers in food halls have found themselves tucked out of sight.

Santa Clara County was one of the first jurisdictions in the whole country to issue a shelter-in-place order due to the Covid pandemic last March, and has maintained some of the tightest restrictions in the country since.

SoFA Market’s general manager David Ma was preparing for the second annual block party for the SaaStr convention in the weeks leading up to the initial wave shutdowns last March. As events and other conventions were postponed, Ma said the subsequent cancellations were like “a domino effect.”

“There were no more First Friday events, there were no more SoFA street fairs,” he said. “Basically, all the public stuff that we depend on went to zilch.”

Santa Clara County officials have told residents to keep six feet from others and stay outdoors when around people from multiple households. Many people listened, leaving normally bustling events and locales desolate.

As the events stopped short, so too did the majority of SoFA’s revenue streams. So far, three businesses have closed during the pandemic, though not all entirely because of finances. Ma consistently checks the county website and Gov. Gavin Newsom’s website for updates on dining and events.

“We’re very much open to pivoting,” he said. “Every other week, we need to do this, and here’s the new guidelines from the county and the state,” he said.

“At this point, it’s been pretty daunting.”

Tom McEnery, San Jose’s former mayor who launched San Pedro Market Square in 2011, said he could never have guessed the gravity of how the pandemic would impact the 17 eateries, bars and cafes in his market.

“I’ve been through a lot of different phases in downtown, and without a doubt, this is the most difficult one,” he said. “To go from being on the cusp of a new era with a lot of small businesses doing well to where we are now is, to say the least, shocking.”

Lauren Burns has run Voyager Craft Coffee at San Pedro Square Market since June 2018 with partner Sameer Shah. She said she misses her customers and the businesses she worked alongside for years. But the dip in revenue has been most daunting.

Voyager closed up shop at San Pedro Square for about eight weeks at the start of the pandemic. She saw confusion among the businesses in the market as well as missteps from upper management to help the businesses during the uncertainty. She estimates San Pedro Square Market lost at least three tenants early on in the pandemic, but McEnery said he hopes most will return after life returns to normal.

“As a market, San Pedro has suffered—a lot—through this pandemic,” she said.

Burns applied for the federal PPP loan and other grants, but those applications took her focus from the rest of the business. Voyager eventually got a DoorDash grant in December, but she’s looking for other financial assistance to make up for the 40 percent to 50 percent revenue dip while trying to keep her employees working.

“The biggest thing about Covid and running a small business is that it took over everything,” Burns said.

But it’s not just the restaurants at San Pedro Square that have struggled. Across the downtown, at the SoFA Market, Echeverri estimates 90 percent of Habana Cuba’s business came from walk-in traffic prior to the March 15, 2020, shutdown.

That number now? Zero.

Echeverri’s revenue is down at least 70 percent overall, “but my spending is still the same,” she says. “So, I’m just like, man, how am I going to do this?”

Lockdown Lifts

Despite how grim things look at the moment, there’s some hope on the horizon.

Newsom on Jan. 25 lifted stay-home orders for nearly 40 million Californians. The announcement returned Silicon Valley to its “Purple Tier” designation, which still comes with limits, but allows for outdoor dining and some indoor business operations.

San Pedro Square Market will reopen outdoor dining on Wednesday. SoFA Market reopened its outdoor patio last week.

The announcement helps in the near-term, but it doesn’t alleviate the long-term stresses of oscillating restrictions, including future shutdowns and customers’ shaken confidence.

“We’re probably at the most normal business we’re going to be until there’s a complete vaccine rollout,” Burns says. “But San Pedro is very, very slow to pick up business.”

Echeverri is also balancing safety with the dire need for customers and cash flow.

“If you really want to help the restaurants, you’ve got to order directly and pick up,” she says. “You don’t have to order all the time, but order once in a while.”

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