While I am hardly a financial expert, I do like to try and look ahead to see what is coming with the economy in the future. I often am reminded of the scene in ‘Trading Places’ where Eddie Murphy’s character uses his knowledge of how average people work to predict things more effectively than the so-called experts.
As a bankruptcy attorney I saw the banking collapse coming well before most did because I saw so many banks losing tons of money when people surrendered their homes. It wasn’t so much that I was a genius as I was just in a position to see places like Countrywide losing millions of dollars in mortgages from my cases alone. It didn’t take much time to figure out that if every other bankruptcy attorney was seeing the same thing that these banks were in deep trouble.
The other day I had another moment of pondering as I drove past a shopping center where we used to have a Mervyn’s and just down the street was a Circuit City and Linen’s and Things location.
As I thought about these vacant storefronts I was reminded of a building I used to rent an office in. The owner didn’t do a good job of keeping his renters happy and pretty soon the place was vacant and he was in big trouble.
This led me to ponder just what is going to happen to all of the empty commercial property being given up by these bankrupting businesses. While some will certainly attract new renters it is likely thay many will find it tough to rent in a down market. This is likely to lead to some significant cash flow problems.
Beyond that many of these shopping centers were anchored by the now vanished stores and now there is likely to be a ripple effect with smaller businesses in the center, leading to even more losses.
Doing a quick check on the internet it seems that I am not the only one concerned with this potential problem. Indeed it seems like the commercial market is actually in an even worse position than the residential one was when it comes to being overextended and it does not look like we have any plans in the works to solve the problem.