How Skyrocketing Rents Are Forcing Your Favorite Restaurants to Close

The parade of soon-to-be shuttered restaurants reads like a Dallas culinary Who’s Who: Cru in the West Village, The Porch on Henderson and Adelmo’s at Inwood and Lovers. Yes, restaurants close all the time, but why so many well-known ones so recently?

The reason might be spelled R-E-N-T.

“I know lots of big-name, big-money restaurant investors, and they’re saying, ‘Let’s hold up, let’s hold off for a year or two, until the situation gets under control,” says one Dallas real estate leasing specialist, who asked not to be named because discussing rents is so taboo among their colleagues and clients. “They’re seeing a market that‘s so hot, they just want to wait it out.”

Rent is the one restaurant subject no one likes to discuss. The Texas Restaurant Association can cite statistics for the skyrocketing cost of labor, food and credit card fees, but doesn’t have any numbers for rent. Nevertheless, when Adelmo’s announced it would close at the end of the year, owner Adelmo Banchetti didn’t mince words: “Due to a massive increase in rent, and lack of support or respect from the landlord, we will be closing Adelmo’s at Inwood.”

Restaurants go out of business for a variety of reasons, of course, from owner fatigue to changing customer tastes and demographics. And high rent is nothing new; they’ve been a problem on the West Coast and in New York City since long before the pandemic. But Dallas, for a variety of reasons unique to the area, hasn’t necessarily seen the same sort of problem.

Two factors make Dallas’ rental situation unique. The first is the demand for restaurant space, which leasing officials say is higher than in much of the rest of the country. Second, the lead executive director at the Texas Restaurant Association, Corey Mobley, says an influx of investors from elsewhere in the U.S. wants to take advantage of lower real estate prices than in New York, California, Chicago, and South Florida.

As such, several people interviewed for this story said, they’re buying land from many of the city’s long-time property owners, who had less incentive — or need, such as high-interest bank loans — to raise rent.

“Yes, it’s easy to blame the outsiders,” says Jon Hetzel of Madison Partners, which leases properties in areas including East Dallas, Lower Greenville and Deep Ellum. “But the same thing is true if someone local buys the property. Whoever it is paid a big number for the property, and they’re less willing to live with a legacy tenant at below market rents.”

A North Texas retail market study confirms the trend. Matthews, one of the largest commercial real estate firms in the country, reports that rent levels locally have outperformed markets across the country, as rent growth has averaged 5% over the past three years, with even higher rent in submarkets like North Dallas, Uptown and Frisco.

Ironically, say leasing officials, the rent increases are not so much because there isn’t enough supply to meet demand, but because the new owners see a chance to boost rents for the most prestigious properties, which, of course, is their legal right to do. These are called Class A spaces in the trade, and Hetzel describes them as the handful of top-notch, walkable, mixed-use retail properties in the city.

And where do many of the city’s best-known restaurants sit? On Class A space. So, given that it’s Class A space, it’s not necessarily difficult to bring in new tenants willing to pay the higher rents, while leaving established tenants in the lurch.
And leaving their customers wondering what’s happening.