CNNMoney: The Dead Mall Problem

Thanks to a reader for bringing this story to my attention - I believe this was lifted directly out of the blog in late 2007 ;) ... or could of been. One of our favorite themes - the "over retailing" of America. Not that commercial REIT stocks care right now (some of the hottest stocks outside gold or dry bulk shippers!) because the Federal Reserve will backstop all malls (or the Treasury will outright buy them all) Yippee!

• As the recession leaves more retail casualties in its wake, rising store bankruptcies and mall closures could have devastating economic consequences. As more stores exit malls, vacancies in regional malls could rise past 7% by year-end, a level not hit since the first quarter of 2001, according to real estate research firm Reis.
• Both Birnbrey and Susan Wachter, professor with University of Pennsylvania's Wharton Real Estate Department, warn the social and economic impact of empty stores can be devastating. (this is what Michigan looks like right now, strip mall after strip mall 30-70% empty) "One of the biggest consequences [of store and mall closings] is the loss of a sense of community," Birnbrey said. "I am a big believer that malls are an essential part of Americana. A mall is a place where people gather and socialize."
• In addition, many municipalities are heavily dependent on retailers for the tax revenue and jobs that they generate. For example, Montgomery County, Pa., gets as much as 50% of its tax revenue from the local King of Prussia mall, said Wachter. The impact will be felt on local police service, schools and roads, said Birnbrey.
• The village of North Randall in Cuyahoga County, Ohio, is on the verge of extinction after a challenging economic and competitive climate has crippled business at the Randall Park Mall. The shopping center, once the largest enclosed mall in the greater Cleveland area, is closing after 32 years
• The pain could be far reaching. "The Midwest, California, Florida, Atlanta and Arizona are very vulnerable to a retail recession," said Wachter.
• In 2009, the ICSC estimates that store closings could exceed 3,100 in just the first half of the year. However, the number of potential closings rises exponentially when the firm takes into account both public and private sector businesses. (ah the key - the small mom and pop stores that no one pays attention to and all our government statistics miss - in fact our government employment reports say new mom and pop stores are opening in large scale each month in their birth/death model!)
• The ICSC projects that about 148,000 retail establishments - both public and private - will go out of business this year and another 73,000 stores will close in the first half of 2009. (mmm, all these people will however be buying homes at 4.5% interest rate... no, 3.5% ... no 2.5%... wait, you mean there is no rate people without jobs will pay for homes? Hmm... problem) The ICSC projects that about 625,000 retail jobs will be eliminated this year "with little change in the pace for early 2009." (anyhow Wall Street doesn't care - they have a thesis - Big Ben will have every American age 21-48 in a new house within 18 months at 3.85% interest rate so buy early cycle stocks - who cares about facts on Main Street - we don't have time for facts when the algorithm says buy early cycle stock since Federal Reserve backstops everything in America)
• But not everyone sees a dead mall as a negative development. "Our country has six times more retail space per capita than any other county," said Ellen Dunham-Jones, director of the architecture program at Georgia Institute of Technology. (ohhh, a new statistics I never knew - thank you, I'll be mentioning that one in the future) "We're just cannibalizing our existing stores by building more stores even when sales aren't increasing," she said. "We were long due for a retail correction and we're going through it now."
• Birnbrey's criticism was somewhat harsher. "It's human nature to put a positive light on a bad situation," he said. "It's just a case of hope springs eternal." (yes... yes... we call it Kool Aid)
  

[Nov 27: AP - Malls, Hotels Next Victims in New Mortgage Crisis]
[Oct 18: CNNMoney: Mall's Demise Could Doom Communities]
[Jul 30: Bennigan's, Stake & Ale Close - File for Bankruptcy Protection]
[Jul 21: Add Mervyn's to our Growing Litany of Retailers Headed to the Great Sunset]
[Jul 10: Another Retailer (Canary in Coal Mine Down]
[Jul 5: Bloomberg: Teenagers Skip $50 Jeans in Squeeze of Gas, Job Shortage])
[Apr 11: This Day in Bankruptcies - Another Airline and our First Major Retailer]
[Mar 4: WSJ - Building Slowdown Goes Commercial]
[Dec 26 2007: Credit Downturn Hits the Malls]
[Dec 10, 2007: CompUSA Closing - One Less Competitor for Walmart]