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I feel that your argument only makes sense if one player controls a majority of the market, so that the majority of sales stolen by the new restaurant come from the same owner's existing restaurants. It's not enough to just own a handful of nearby buildings, you actually have to dominate several blocks. And decide to keep a bunch of that valuable real estate empty instead of converting it to condos.

Here are some possible explanations:

1) Deliberate price-fixing behavior from a majority cartel of owners. A lot of these buildings are owned by publicly-traded REITs. This would be a pretty big conspiracy.

2) Price stickiness. Prices have not caught up to reduced demand. Accepting a lower rent means losing. A version of this is the reason given in the article.