Recent Closures, Shifting Demographics Change Denver’s Restaurant Real Estate Landscape

Large national restaurant chains are suffering, closing locations across the country, including in Colorado. But at the same time, the inflow of new people to the state during the 2010s has spurred a wave of restaurants with cult followings to open their doors along the Front Range. 

The openings of fan favorites like In-N-Out and Whataburger that began during the pandemic and have accelerated since, combined with the closure of old standbys like Red Lobster, showcases the precarious position of the metro Denver restaurant scene.

While a flood of new Coloradans moving from places like California and Texas made the state an expansion target for big brands in the restaurant business, others in the industry are struggling to keep up.

“The inflationary pressures, labor shortages, burdensome regulations, and supply chain disruptions of the past several years have taken a toll on Colorado’s restaurant industry, primarily forcing independently owned, full-service restaurants to close their doors,” Colorado Restaurant Association President and CEO Sonia Riggs said in an email to Bisnow.

Roughly 130 restaurants closed in metro Denver in 2023, by Westword’s count, following pandemic lockdowns that shuttered hundreds of restaurants, including some beloved local favorites.

The closures come as the broader restaurant industry in the U.S. reckons with a new landscape in the wake of the pandemic, and Denver is better off than many other cities. Still, times are tough, according to Cameron Flint, a Denver-based associate with CBRE, especially for small enterprises.

“It’s very hard,” Flint said in an email to Bisnow. “Many owners are looking for corporate credit clients with strong balance sheets. Rents and construction prices haven’t decreased and if you couple that with minimum wage increases in Denver, it makes operating a restaurant very difficult and expensive.”

Those credit clients tend to be major chains coming to the area to satisfy the appetites of recent transplants. The most recent example was this spring’s opening of a Buc-ee’s convenience store about 45 minutes north of Denver in Johnstown. Buc-ee’s is a gas station chain, but it is also a favorite for rotisserie chicken, sandwiches and barbecue. 

The wildly popular store is headquartered in Texas and can be found across the South. The Johnstown location, at 74K SF, is among its largest and represents the company’s efforts to reach the herds of Texans who have moved to Colorado in recent years. Census Bureau data shows that more than 25,000 people moved from Texas to Colorado in 2022 alone, trailing only California, from which 33,000 people relocated to the Centennial State.

Similarly, California favorite In-N-Out began opening Colorado locations in 2020 after years of Californian migration. 

“The influx of coastal residents moving to Colorado over the past decade has helped expand the dining scene across the state, due to higher demand and an expectation for diverse types of restaurants and cuisines,” Riggs said.

Although closures are common, vacancies tend to be filled quickly, according to Shawn Sanborn, president of Sanborn and Co., which specializes in restaurant real estate. Taking up residence in the shell of a former restaurant is particularly appealing for smaller operators, he said.

“We talk about second-generation restaurant space, meaning that all the infrastructure is in place — grease trap, plumbing, electrical, hoods, bathrooms, etc. — where another operator can come in and basically do a cosmetic remodel and a freshening of the physical plant,” he said. “Those are the ones that generally bring the best opportunity for local or regional operators, where the local and regional operators don’t have as deep pockets as the nationals.”

The big restaurant chains, on the other hand, can go in with ground-up construction and may pay up to $400 or $500 per SF in tenant improvements. 

“So when we do have nationals that close, it does create more opportunity for local restaurant operators,” he said.

Most restaurant leases are triple net, Sanborn said, which means added costs for items such as insurance and taxes. 

“Over the past several years, it’s been a very large increase,” he said. “And then common area maintenance has also gone up. With inflation, the cost of everything is higher. The cost of your snow removal, landscaping, repairs — all those are higher.”

Those same inflationary pressures are impacting customers at restaurants as well, Sanborn said, another cause for concern.

“There will be a tilting point. There are only so many $18 or $20 hamburgers someone is going to buy,” he said. “At some point, all the costs impacted in the restaurant have to be translated down to the consumer. At some point, that demand is going to go down. People won’t be eating out as often and spending as much money.”