Now we can all see that the economy is changing and in many cases for good. Charles Hugh Smith posting at Zero Hedge explains that retail shopping malls are an endangered species. We have all seen the many empty store fronts in the malls.
Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail
Retail CRE is highly leveraged and loaded with staggering amounts of debt that rests on leases that are only as good as the retailers’ profit-loss statements and solvency.
The decay of the “build it and they will come” model of commercial real estate is gathering speed for a simple systemic reason: the decline is self-reinforcing in several critical ways.
Before we start the analysis, let’s ask a basic question: How much of the stuff and services purchased at retail outlets, malls, strip malls, etc. is absolutely necessary and how much is excess consumption?
He points out that there is a consumer related factor – most people simply don’t have as much disposable income any more:
As the cost of big-ticket household expenses such as healthcare, energy, college, etc. rises while real income declines for the bottom 90%, households have less disposable income to spend on excess consumption–another tattoo, skinny-triple-mocha-fudge-lattes, 13th pair of shoes, etc.
And then there are the economics of retail malls:
The primary point here is that CRE is highly leveraged and loaded with staggering amounts of debt that rests on leases that are only as good as the retailers’ profit-loss statements and solvency.
Our entire economy has been based on debt and consumerism, usually buying things we really didn’t need, which is no longer sustainable and never will be again. And then there is online shopping – why go to a half empty mall when you can order what you want from your computer and have it delivered to your home? I’m retired and have my Social Security and I was able to set away a fair amount when I was still working so yes I’m still buying stuff I really don’t need but I do most of it from the convenience of my office.