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.
Cecilia Benalcazar co-owned Federal Hill’s In Bloom, which shuttered its doors last month. Benalcazar told The Baltimore Sun that millennials are demanding $12-to-$18 price point on meals or more happy hour deals, which puts a tremendous strain on her chefs, who used high-quality, trendy ingredients that frequently cost more.
Benalcazar was among other restaurateurs, consumer analysts, and customers who told The Baltimore Sun that many are fleeing the city, either for safety concerns — or because the price points are too high.
In Bloom was one of the 24 restaurants that have so far collapsed since the start of 2018.
“For five restaurants to go out of business something is going on. Maybe [the crime] was the nail on the head,” Benalcazar reasoned.
According to official Baltimore City Police Department data, violent crime in the region surged to two-decade highs, following the 2015 Baltimore Riots which forced the Maryland Army National Guard to lockdown the city for more than a week. The opioid crisis is also fueling a massive increase in violent crime, including homicides, shootings, and robberies across the city.
Besides blaming the millennials and violent crime, the restaurateurs, consumer analysts, and customers failed to mention the severe wealth divide which plagues the city. Many residents have been left behind in the Central-Bank induced economic expansion over the past eight years. In return, there are tens of thousands of Baltimorons who are too broke to consume.
Here are the Baltimore restaurant and bar closures in 2018:
After six years, Fork & Wrench, the Canton restaurant on Boston Street, closed in early May. (Source: Lloyd Fox / Baltimore Sun)
After a fire May 1, owner, Tony Weir said he hoped Charles Village Pub could reopen within two to three weeks. (Source: Christina Tkacik / Baltimore Sun)
Modern Cook Shop, at 901 S. Wolfe St. in the Union Wharf apartment building, will serve its last meals May 5. (Source: Kenneth K. Lam / Baltimore Sun)
The Corner Restaurant and Charcuterie Bar, at 850 W. 36th St. in Hampden, will close for good Monday, April 30. (Source: Gene Sweeney Jr. / Baltimore Sun)
Bistro Rx in Canton closed in mid-April. The bar and restaurant is slated to be replaced by a to-be-named concept. (Source: Tom Brenner / Baltimore Sun)
HarborQue in Federal Hill closed in April. The owners plan to take their business on the road with food trucks and catering services. (Source: Michelle Gienow/For City Paper)
Regi’s American Bistro in Federal Hill closed in April after 40 years in business, the last 15 of which were overseen by owner Alan Morstein. (Source: Barbara Haddock Taylor / Baltimore Sun)
Mussel Bar and Grille in Harbor East closed at the start of April due to construction and street closures surrounding its building. The restaurant plans to reopen in April 2019. (Source: Colby Ware for the Baltimore Sun)
Aggio, Bryan Voltaggio’s last remaining restaurant in Baltimore, closed in March after four years at Power Plant Live. (Source: Kim Hairston, Baltimore Sun photo)
In Bloom in South Baltimore (1444 Light St.) closed in April after it was rebranded from Liv2Eat last year. (Source: Algerina Perna / Baltimore Sun)
8 Ball Bar & Grill, which debuted as 8 Ball Meatballclosed early in April after two years in business in Fells Point. (Source: Barbara Haddock Taylor / Baltimore Sun)
The Tilted Kilt in White Marsh closed abruptly in March. (Source: Colby Ware/ Baltimore Sun)
Wine Market Bistro in Locust Point closed in March after 14 years in business. The wine shop portion of the space remains open. (Source: Colby Ware / Baltimore Sun)
Bluegrass in South Baltimore closed for a rebrand. It’s unclear what will take its place. (Source: Algerina Perna / Baltimore Sun)
Play Cafe in Hampden closed in March. Source: (Barbara Haddock Taylor / Baltimore Sun)
The Bun Shop closed its Light Street location in downtown Baltimore in March. Its original location in Mount Vernon remains open, and another shop in Towson is in the works. (Source: Caitlin Faw / Baltimore Sun)
The Foreman Wolf Restaurant Group closed Petit Louis Bistro in Columbia and replaced it with Lupa, an Italian restaurant. Petit Louis in Roland Park is still open. (Source: Dylan Singleton, Baltimore Sun)
Jack’s Bistro closed in January in Canton, where the Regal Beagle is temporarily taking its place. (Source: Kenneth K. Lam / Baltimore Sun)
Waterfront Kitchen in Fells Point closed in January and was replaced by Ampersea, a rebranded restaurant under the same ownership. (Source: Doug Kapustin / Baltimore Sun)
The Life of Reilly Irish Pub in Butchers Hill closed in January. (Source: Handout)
Dinosaur Bar-B-Que closed in Harbor East in January. (Source: Kim Hairston / Baltimore Sun)
Ryan’s Daughter Irish Pub & Restaurant in Belvedere Square closed in January. (Source: Barbara Haddock Taylor / Baltimore Sun)
Ryder’s closed in January in Upper Fells Point and was soon replaced by a new bar called Happy Hour Heaven. (Source: Barbara Haddock Taylor / Baltimore Sun)
Bagby Pizza Co. closed its Harbor East flagship restaurant in January. (Source: Doug Kapustin / Baltimore Sun)
In Summary, the coming restaurant apocalypse seems to have reared its ugly head in the Baltimore region, where crime, millennial trends, surging short-term rates, and widening wealth inequality have popped yet another Central-Bank induced bubble. Good luck Baltimore, you will need it.