James Quinn

Ghost Malls: Coming to Your Town

The basic advice I'd give is pay down debt, try to build a 6 month emergency cash fund, be the best managers in your respective stores, and hope for the best. If the retailers you work for are value oriented, they should do OK. If they appeal to the high end, they will struggle.

Ghost Malls: Coming to Your Town

Municipalities will get hammered if malls go dark. The local governments assumed that the tax revenue from wage taxes and housing sales would continue permanently. That tax revenue is drying up. This is why municipal bonds have sold off so badly. The market sees municipal bankruptcies soaring.


On Jan 21 01:21 PM OldNavySailor wrote:

> Jim,
>
> What about the impact on tax revenues for local municipalities? I
> assume governments still collect property taxes even though the occupancy
> rate for malls, shopping centers, professional complexes, etc. have
> fallen.
>
> Are there any statistics showing the potential loss of property tax
> income if these developers go bankrupt?

Ghost Malls: Coming to Your Town

I don't think the dollars were really discretionary. They were borrowed.

Instead of going to the Mall and eating at Cinnabon, maybe they'll take a walk in a state park.


On Jan 21 03:45 PM h2oworks wrote:

> What a great discussion. Here is my two cents.
> Shopping at the mall became/is entertainment. If some malls close,
> what will those folks do to entertain themselves? And you have to
> figure those folks probably don't have as much money as they did
> a year ago.
>
> If my premise is correct who benifits? Where will discretionary dollars
> go?
>

Ghost Malls: Coming to Your Town

I got the chart from Mike Shedlock's site. I think the explanation is that there is a very long lead time from construction start to delivery for a mall. The heavy starts may have happened in the late 90's and early 2000. I know a big box store has a 2 year start to delivery time.


On Jan 21 02:54 PM John Lounsbury wrote:

> Jim - - -
>
> Thanks for the article. What some people don't realize is that the
> over-expansion in retail real estate is a nearly national phenomenon.
> We have had some localized problems with retail space over-supply
> during the past 30 years, but this is much more widespread.
>
> I have one problem. I can't understand your chart showing construction
> starts and deliveries since 2001. Construction starts are much lower
> than deliveries. This implies a large pent-up demand, but then there
> would have to be some source of supply besides new construction.
> Does deliveries include re-lease and resale in addition to deliveries
> of new construction? Your statement of lack of demand is supported
> by the increasing vacancy rates for deliveries, but the percentages
> shown for every year through 2007 seems much larger than the size
> of the green block would indicate. Is this related to my previous
> question regarding new deliveries and "retreads"?
>
> Jim, can you clarify? If I am just missing something obvious, don't
> hit me too hard.

Ghost Malls: Coming to Your Town

I'm not assuming every retailer goes broke. I'm also not assuming every mall becomes a ghost town. I said in the article, that the malls in the outer suburbs are most in danger. There are 1,100 major malls in the country. Many were developed on a false demand premise. If expected demand was overestimated by 20% (very likely), then many retailers overexpanded and will have to close underperforming stores, even if they don't go bankrupt. The Mall of America and King of Prussia mall will be OK. The marginal malls (there are many) will go dark. Of those 1,100 malls, 100 to 200 will go dark in my estimation.


On Jan 21 08:31 AM battman wrote:

> You're assuming every retailer is going broke. Yes I agree then,
> if EVERY retailer goes broke, then malls will be ghost towns. The
> reality, which you don't want to see because of your 14 years experience
> is not EVERY retailer will go broke. Cineplex Odeon as an example
> filed for bankruptcy and restructured and now are stronger than ever.
> Some landlords get screwed, some suppliers get screwed, but things
> go forward and we're still watching movies. The same will happen
> with the real stores. If they have a good story, they will reorganize
> if need be, shut some underperforming stores, screw some landlords,
> some suppliers and stay open for business.
>
> It isn't rocket science, landlords and banks don't benefit from empty
> space, so when they can, they will work with tenants.
>
> On Jan 21 07:46 AM Jim Quinn wrote:

Ghost Malls: Coming to Your Town

-2% GDP. Are you reading economist predictions? Go back to January 2008 and look up their predictions then.

I love to read the thoughts of people who refuse to deal with reality. The fake boom is over. If you are looking for the great Obama recovery of 2009, you are going to waiting a long time.


On Jan 20 08:35 PM Zeon wrote:

> It's funny how people like to wallow in the doom and gloom. GDP is
> expected to decline by 2 percent during 2009. Hardly a depression-level
> statistic. Consumers will continue to pull back, of course, and it
> will become hip to be frugal but it won't last. Human nature doesn't
> change overnight, not even at the point of a gun. The next recovery
> will be different from previous recoveries, just as the cause of
> the recession is different. But boom will follow bust as usual. It's
> the American way.

Ghost Malls: Coming to Your Town

A mall depends on its anchors. If the anchors go dark, the mall dies. Sears is dying. JC Penney and Macy's are on the ropes. The developers are tettering on the verge of bankruptcy. I'm sure last summer you thought the banking system was just having a little downturn. Deal with reality.


On Jan 20 07:45 PM battman wrote:

> When it's sold under power of sale, it sells cheap enough for someone
> to buy it. I think your viewing it as individual stores is inaccurate.
> You have to look at someone buying a whole plaza or an entire mall
> where the vacancy may be 10% - 20% - 30% or whatever it is. You won't
> find a mall that is 100% vacant, and if there are existing tenants,
> the leases can be renegotiated to help ensure they stay open and
> if stores stay open, they can lure new tenants. That's the way it's
> been done before and most likely the way it will be done again. I
> suspect there may be some ways to make easy money with all the government
> bailouts allowing banks to write off some of their bad loans to property
> owners allowing them to sell assets cheaper than they would have
> normally, giving buyers more ultimate upside.

Ghost Malls: Coming to Your Town

People will shop. You truly don't get it. Retailers overestimated future demand by billions because they extrapolated the false demand blown up by mortgage equity withdrawal. I worked for a big box retailer for 14 years and I know exactly how sales forecasts are generated. There will be ghost malls aplenty. Wake up and smell the coffee Bubble boy.


On Jan 20 07:43 PM Commodity Bubble Proponent wrote:

> To James: Grow up and stop being so melodramatic and learn how to
> interpret the data behind your argument.
>
> I agree with Tazman. You will have some vacant malls, some stores
> will close down, but people will still shop.
>
> An 8% reduction in consumer spending as a percentage of the US GDP
> hurts, but it is not a doomsday number.
>
> These malls will eventually be redeveloped. In retail, there has
> been a significant shift in the last 10-15 years to outdoor, pedestrian
> friendly shopping and away from the titan malls of the 1980s. These
> outdoor malls (and there are a few in my area) have done quite well
> and are not in danger of becoming ghost town.

Ghost Malls: Coming to Your Town

When someone loses a property through bankruptcy, it can sit unoccupied for years. You assume there is a buyer. If the demand has been false because of the use of debt, the stores should have never been opened. The false demand isn't coming back. Ghost Malls.


On Jan 20 06:32 PM battman wrote:

> I think one of the errors you make is the simple fact that when someone
> loses a property through a power of sale, someone else buys it cheap
> enough that they can put in tenants at cheap rents to make it work
> whereas the orignal owner couldn't without losing too much money,
> so in the end, will there be "ghost malls"? I doubt it. I said the
> same thing back in 89 - 90 with all the Industrial that went up,
> and I was wrong then, and I think you've exagerated now.
> Do I look forward to what is to come, no, but people are resilient,
> and will always find a way.

Ghost Malls: Coming to Your Town

It's happened before. It will happen again. This is not doom and gloom. The massive amount of consumer leverage will unwind and retailers will go under en mass. You can't hope reality goes away.


On Jan 20 11:24 AM tazman wrote:

> While there will be some loss of stores in malls, there are stores
> who are looking to expand as well. Not everyone is doing poorly.
> I do think we will see some small strips going dark, however the
> likelyhood that a major mall will be a ghost town is highly unlikely.
> You might see a few more dark storefronts for a while, you are not
> going to see enclosed malls going dark. We need to be realistic about
> what is happening, but we also need to be careful to not buy in to
> the radical doom and gloom you hear everyday. You don't want to have
> a self fulfilling prophecy.