Monday, April 11, 2011

Mall vacancies

The Clarion Content warned more than a year ago of an impending secondary real estate bubble that could smack the American economy around, commercial real estate. We had read lots of analysis that said there were a ton of short term commercial real estate loans that were going to have to be refinanced, only with the new lower property valuations figured in. The slowing economy was also supposed to continue to hurt commercial occupancy rates.

This week we read that the less disastrous of these two dire predictions is indeed happening, this year malls and strip malls are supposed to see their highest vacancy rates in more than twenty years according to the Wall Street Journal. The paper reports, "Mall vacancies hit their highest level in at least 11 years in the first quarter." The expectation is that the worst is yet to come.

There is, as our sources suggested their would be, a glut of commercial real estate space. Reportedly, more than one billion square feet of retail space was built in the fifty-four largest American markets since the start of 2000. Many retailers that had been key mall and stripmall tenants, Borders, Blockbuster, Circuit City and Comp USA have nose-dived or gone out of business.

American cities already staggering under repeated economic body blows are losing lots of sales tax revenue as shoppers continue to migrate on-line. Big Box corporations are crushing mid-size competitors and specialty stores. The impact on the overall economy is very real. The base of pyramid that supports our massively indulgent and expensive lifestyles as Americans is having foundation issues. We must look at ourselves in the mirror carefully.

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