Some Fear Austin's Restaurant Bubble May Be Bursting

Jan 12, 2017

Over the last few years Austin became something it never was before: a foodie destination. In some parts of town, it feels like a new high end restaurant or gastropub opens up every day. But that boom in the restaurants and bars might not be sustainable. In fact, some people worry the bust is already here.

When Black Star Co-Op Brew Pub opened in 2010 at the corner of Airport and Lamar boulevards, it seemed like a perfect fit for Austin – farm-to-table food, fresh-brewed beer,  a progressive, cooperatively-owned business model – and for a while it was.

“A couple years ago, our biggest complaints were that it was too busy. The lines were too long, the waits were too long,” says Johnny Livesay, a co-founder and head of kitchen at Black Star.  “Now, were not seeing those problems.”

A screenshot of Black Star's letter announcing a possible closure.
Credit via Reddit

In the past few years, Livesay says, business has dropped off. And, while workers have taken pay cuts to keep the place afloat, Black Star announced in an email to its members last week it may shut down by the end of the month.

If it closes, it would join a long list of restaurants that have closed in Austin recently. Evidence, for some, of a bubble.

“For us, looking at the Austin landscape there’s been enough shuttering going on that you can easily see that it is bursting,” says Livesay. “It’s peak-food trailer. Its peak-hot-counter-service restaurant that was here for a  month, and you loved it, and now it’s gone.”

Livesay has worked in the business since he was a teenager. He understands that, even during good times, the industry is littered with shuttered stores. But he thinks what’s happening in Austin may be different. It may be, essentially, an over-supplied market, where so many new venues are opening that none have a chance to thrive.

Nationally, other cities see the same trend.

Livesay says he welcomes the arrival of other brew pubs, but also thinks they’ve impacted his pub's bottom line. He thinks when Black Star opened there may have been about six breweries in Austin. Now, there are around 30.

“There are some headwinds out there,” concedes Richie Jackson, head of the Texas Restaurant Association. “I mean a lot of the leases were negotiated when the economy was soft and it was easier to get concessions from landlords and those have come due.”

Still, Jackson doesn't like to use the word “bubble.” He says closures are part of the normal lifecycle of the industry.

“Sometimes you’ll see that the people who close one restaurant turn right around and open another one with a new concept, maybe a new locations, and a bright new future ahead of it,” says Jackson.

Of course, all those re-openings also crowd the market and dilute a customer base that just might not be growing fast enough.

At the patio of Black Star Co-Op, Janine Hurd sips a beer and sums up the dilemma of the Austin restaurant-goer.  

“I’ve been here for 12 years now,” she says. “A lot of places have opened up and a lot of places have shut down. It’s sad that they’re gone. But, at the same time, it’s hard to be loyal with all the new places that are opening.”

She says she hopes Black Star will survive and Livesay says it just might.

Black Star's email to its members was posted on Reddit and, since then, the co-op saw a record day of sales and, Livesay says, the customers are back. He’s just not sure for how long.