I was floored at the recent study showing that Denver has now surpassed New York City for most expensive place to run a restaurant. How is it possible that it is more expensive to operate in Denver than other large cities throughout the country? What was in the recent study? What is causing the surge in costs in Denver? Is this a blip or has something fundamentally changed? What does this surge in costs for a restaurant mean for real estate? Should you avoid Denver real estate?
What was in the study on Restaurant Costs in Denver
An industry study released Friday concludes that Denver is one of the most expensive cities nationwide for eating out. The report, called the “2025 State of Denver Restaurants: Challenges Facing the Sector” is the output of a task force’s monthslong research and surveys of restaurateurs and staff to look at what ails the industry and what can be done about it.
Denver’s Restaurant Economy: Challenges and Trends
Form the report: “The restaurant industry is a critical component of Denver’s economy, employing7.9% of the city’s workforce, down from 8.7% in 2019, and contributing approximately 13% of Denver’s sales tax revenue. Despite its importance, thesector is undergoing structural contraction rather than recovery. Pre – pandemic, Denver’s restaurant employment was on a steady growth trajectory. However, the sector is now estimated to be missing approximately 10,0 00 –15,000 jobs that could have been created had earlier trends continued, and not a shrinking of the workforce due to labor and wage constraints.”
Rising Costs and Compressed Margins
Denver’s restaurant operators face mounting cost pressures across every major expense category, leading to enormous strain on their business :
- Labor Costs: Hourly pay rates have risen by an average of 50 –55%, with tipped positions experiencing a 95.4% increase. Every person, regardless of tips, receives the minimum wage. Tipped workers receive this wage at minimum, while often exceeding it, sometimes to wages between $30 to $ 50 per hour .
- Property Taxes, Insurance and CAM fees: Costs have risen a reported 30 % during this timeframe.
- Utility and financing costs: Sustained inflation has driven these expenses to new highs.
- Government – mandated programs: New state – mandated benefits such as the Family and Medical Leave Insurance (FAMLI) program (implemented in 2023) and the Healthy Families and Workplaces Act (HFWA) (mandatory since 2021) have further raised costs.
Denver has some of highest costs in the Nation
These challenges are compounded by the highest restaurant inflation rate in the country, which has pushed Colorado menu prices to 5.1% above the national average and 2.7% above the average of the 20 largest U.S. cities. While menu prices in Denver have increased by 28% on average, the cost of food and cost of beverage have largely been kept stable, suggesting that menu price inflation is primarily driven by the other prime cost, labor. Menu price inflation correlates to a decrease in volume and customer visits.
No end in sight for rising costs for businesses in Denver
Unfortunately based on the current trajectory of politics in Denver, I don’t see any scenario with lower costs in Denver regarding taxes, wages, insurance, governmental regulation. The opposite is more likely based on the Current legislative priorities of tax and spend in Denver county. I would anticipate more costs coming down the pipe for Denver business owners. Unfortunately I don’t see any scenario where the current trends reverse.
Denver Real estate will be impacted by costs causing more people to leave
Although we aren’t seeing a big reset in Denver real estate prices yet (just in the condo market so far), we will. As more people leave Denver either for other states or more suburban locations real estate values will reset. Denver will be hit harder than other areas when there is a reset due to less demand, high taxes, and the flight of companies to either other cities or more suburban locations.
The high cost to operate a restaurant is a warning sign for Denver real estate and other businesses about the cost of doing business in Denver. Long term, unless Denver does something profoundly different, look for Denver county real estate to underperform suburban markets and also other large/midsize cities throughout the country.
Denver needs to figure out a balance
Recently, Denver has been so concerned with living wages, homelessness, energy efficiency at the expense of business and property owners. These policies are leading to huge adverse impacts on the Denver economy.
To reinvigorate the city of Denver there needs to be a much better balance of competing priorities. For example, a much lower minimum wage for tipped workers, less red tape, lower taxes, a better balance of energy efficiency versus cost, etc…
Until Denver wakes up and decides to balance competing priorities, the relocation trend of businesses and residents to suburban locations or other cities like Salt Lake City will be turbocharged which is the exact opposite of what Denver wants as it will result in fewer jobs, higher homelessness, and less tax revenue to spend on all their initiatives.
Additional Reading/Resources
- https://www.9news.com/article/news/local/denver-restaurant-report/73-0a614f82-c519-4ea7-9e0c-6a2794ba8f00
- https://corestaurant.org/wp-content/uploads/2026/02/ES_2025-State-of-Denver-Restaurants-Challenges-Facing-the-Sector_Final.pdf
- https://coloradohardmoney.com/what-to-expect-in-colorado-real-estate-the-second-half-of-the-year-will-the-party-continue/
- https://coloradohardmoney.com/denver-a-top-ten-outflow-destination-with-more-looking-to-leave/
