This grim note in the window of a popular restaurant reveals why Sydney is broken

A devastating sign in the window of a beloved Sydney institution shows the once-thriving city is broken, as empty shopfronts replace vibrant businesses.

Sydney’s struggling hospitality sector has been hit by the shock closure of a popular restaurant due to a “selfish” landlord – a trend that critics say is strangling the city’s vibrant culture.

After a busy weekend of service, Contessa Balmain closed for good today with a devastating note hung in the window by owner Marco Adoncello to explain why.

“Due to physical and mental health reasons, Marco is no longer able to keep the doors of Contessa Balmain open,” the sign read.

“Every attempt was made to keep the legacy alive, but unfortunately the selfish actions of the landlord squashed any hopes of that happening.”

Contessa Balmain owner and head chef Marco Adoncello has shut up shop. Picture: Craig Wilson

Contessa has been a local institution for 20 years and Mr Adoncello took over the Darling Street restaurant more than a decade ago, also serving as its head chef.

Gutted locals flooded a post on Facebook to express their shock and sadness at the unexpected news.

One wrote: “Gut wrenching. Marco welcomed us to Balmain when we moved there by offering us orange cake. Went there religiously.”

Another pointed out: “So there will be another empty shop on the main road.”

One asked: “If Contessa can’t survive, who can?” Another concurred: “If they can’t make it work then good luck trying to find anybody else to take over the lease. Landlord has done a real disservice.”

The note hanging in the window of Contessa Balmain today.

The landlord was approached for comment via the leasing agent.

A flurry of industry exits

Contessa’s closure is the latest in a series of hospitality industry losses across Sydney this year, with issues relating to rent price hikes or lease terms being blamed for many.

PropTrack economist Anne Flaherty said the Covid pandemic put intense pressure on businesses and commercial property owners alike, and that impact is still being felt.

“A proportion of landlords might now be looking to recoup some of those losses,” Ms Flaherty said.

Interestingly, the commercial real estate market remains “relatively soft”, but many landlords are still looking to increase rents anyway.

“The key reason why is to do with how retail properties are valued, which comes down to what the asking rent on the property.

“So, if you were to drop the asking rent, it would decrease the property’s value. Some landlords looking to protect the value of their portfolio or key assets do so by maintaining or raising rents.”

It’s why some shopfronts on otherwise busy high streets remain vacant for extended periods of time, she said.

“Those landlords might prefer to have a space sit empty rather than drop the asking rent, which would impact the value of their asset.”

Italian restaurant Seta closed its doors this year.

The popular Chinatown restaurant Zilver shut in February after being pushed out by developers, who are building an office block on the site, leaving the operators “devastated”.

“It is hard to comprehend the owner’s decision to abandon its loyal and long-term tenant,” Zilver Group said in a statement.

Back in March, popular dive bar The Oxford Tavern in Petersham closed less than a year after relaunching following an extensive renovation. According to reports, the lease on the iconic space was up and was not renewed.

Not long after, the shock news came that Italian fine diner Seta in the CBD had shut, with the landlord changing the locks after what was described as a “dispute”.

CicciaBella closed this year after less than three years of operation. Picture: Monique Harmer

That same week in Parramatta, CicciaBella shut up shop and operator Maurice Terzini told The Sydney Morning Herald: “We were in contractual negotiations with the landlord but couldn’t come to an agreement.”

Also in March, Jellyfish Cafe in Manly shut down after going into administration, with rent increases contributing to the business’ fragile finances.

“This is what is happening more and more in Manly as landlords make having a cafe or shop unviable for local businesses,” an angry local wrote on Facebook at the time.

In May, beloved Darlinghurst institution Cafe Pacifico shut its doors after a 15-year run when owner Phil Bayly faced problems with the landlord.

“We’re already paying over the market rate for rent,” Mr Bayly told Australian Bartender at the time.

The cost of rent had more than tripled since he opened the bar, he said, and issues with a leaking ceiling had not been addressed.

“The big lesson is this – be careful about who you get in to bed with when it comes to landlords,” he said.

Hatted restaurant One Penny Red will close on New Year’s Eve.

The same month, late-night favourite Mr Crackles in Darlinghurst shuttered with its owners struggling to cope with skyrocketing costs.

And hatted restaurant One Penny Red in Summer Hill will end its decade-long run on New Year’s Eve after the landlord indicated they were preparing to sell the building.

Challenging operating conditions

Patrick Coghlan, chief executive of CreditorWatch, said business conditions remain challenging and hospitality businesses are at particularly high risk of facing financial trouble.

“Rents, energy prices and the cost of services are keeping the heat in inflation,” Mr Coghlan said. “Our forecast is still for the business failure rate to increase over the next 12 months.”

Ms Flaherty pointed out that inflation “hits both consumers and businesses alike” and hospitality businesses are grappling with high costs.

At the same time, household budgets are being squeezed and discretionary spending is declining.

“We’re seeing people having to spend more of their income on daily necessities and mortgage repayments, which impacts how much they have to spend elsewhere in the economy,” she said.

Contessa Balmain’s closure has been blamed on a landlord dispute. Picture: Craig Wilson

“So, while restaurants face increased costs, they’re also seeing many customers not spending as much as they were.

“And don’t forget, higher interest rates don’t just affect mortgages. Many business owners have debts and so they’re also facing higher interest repayments at the moment.”

More closures likely

Creditor Watch’s latest Business Risk Index puts the failure rate of food and beverage services at 6.83 per cent – the highest of all industries by a wide margin.

“Food and beverage services continues to have a much higher failure rate than any other industry as these businesses tend to pay high rents and have input costs that can increase quickly and frequently,” the report said.

Even smaller hospitality businesses with lower overheads, like cafes and coffee shops, are struggling.

The rising cost of rent, wages, produce and utilities has sparked “a wave of closures” of cafes this year, Reuters reported recently.

Bar Zini owner Damian Krigstein said he planned to convert his cafe into a takeaway-only business to cut operating costs.

“When you look around Sydney and you look at so many businesses for lease, institutions from when you were a child just completely gone now, people losing their livelihoods, it‘s scary times,” Mr Krigstein told Reuters.

Cafe Pacifico in Darlinghurst closed after rent hikes.

Link Business Sales Australasia has hundreds of hospitality outfits on its books across the country, director Guy Cooper said.

“People are starting to panic with increased electricity, wages, rent,” Mr Cooper told Reuters.

Originally published as This grim note in the window of a popular restaurant reveals why Sydney is broken