Tidal Wave Of Baltimore Restaurant Closures Unfolds Into Crisis

Tidal Wave Of Baltimore Restaurant Closures Unfolds Into Crisis

It is official. Consumers in Baltimore appear to be tapped out.

The Central-Bank-free-money-anything-goes-induced restaurant bubble in the most dangerous city in America: Baltimore, has begun a violent period of deflation — on par with a possible collapse.

At least 24 restaurants have closed since the start of 2018, “including Federal Hill stalwart Regi’s American Bistro, Hampden’s popular Corner Restaurant and Charcuterie Bar and Canton’s Fork and Wrench,” said the Baltimore Sun.

Chris LeBarton, a market economist for CoStar Market Analytics, warned that increased vacancy rates for small commercial real estate spaces reflect the recent wave of closures.

“Vacancy rates for spaces up to 3,000 square feet – often home to independent restaurants – rose to 8.1 percent at the end of March, up from 6.8 percent at the end of September, when the city underwent a previous wave of closures. That rate is at its highest since 2010,” LeBarton added.

According to the U.S. Bureau of Labor Statistics, the total number of Baltimore restaurants and bars declined 4.6 percent in 2013 and 2016 – from 1,613 to 1,539. This was not the case nationally, food and drinking establishments soared 5.7 percent, 8.9 million in 2013 to 9.4 million in 2016.

One consumer analyst told The Baltimore Sun that some factors behind the surge in restaurant closures include, “natural cycles of the industry, millennials’ preference for convenience and value and – more particular to this area – competition in the suburbs and high crime rates that ward off suburbanites.”

Downtown Partnership President Kirby Fowler said restaurants are an extremely speculative industry and often have a three- to five-year life cycle.

“There might be issues involving the city’s reputation, but it as well could be an explanation of what the restaurant is doing or not doing,”Fowler said of the factors driving local closures. “To open a restaurant is a risky endeavor, but it’s what we all want to happen more and more.”

Brandon Chicotsky, a business faculty member at Johns Hopkins University, blamed millennials for the recent wave of closures, who want to “eat conveniently,” which means they are too broke and must resort to at-home dining options, including saving money by shopping at grocery stores and or using Grubhub or Uber Eats.

Chicotsky said, “the 18-to-35 age group, in particular, has had 50 percent fewer restaurant visits per capita in the past 10 years, and they go out at a lower rate than older millennials and Generation X, those born between the mid-1960s and early ’80s.”

“Restaurants that are now perceived to offer convenient delivery, high-quality food, and a healthy or sustainable brand association are succeeding more than restaurants, many of which are debt-financed, that invest in dining experiences, reservation services, and parking,” he added.

Chicotsky pointed out that many restaurants are debt-financed, which suggests many operators are financing operations through short-term or medium-term loans possibly pegged to the London Interbank Offered Rate (LIBOR). Since late 2015, the Federal Reserve unleashed an impressive round quantitative tightening, which has sent the one-month Libor near the 2 percent level for the first time since 2008. In other words, restaurants with weak balance sheets, who took on too much leverage are becoming increasingly unsustainable……More Here

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