Strip Malls Struggling

Inquiring minds are watching the commercial real estate market…more specifically, the commercial retail real estate market. People just aren’t dropping off their dry-cleaning or getting their hair styled as much.

…vacancy rates are at 10.9%, a level not seen since 1991, according to Reis, a property analyst.

Although the bankruptcies of some retail chains, such as Circuit City and, as of this week, the book chain Borders, have left big holes, the decline of strip malls has also been caused by rampant overbuilding. In 1990 there were 18 square feet (1.7 square metres) of retail space per person. By 2010 the figure had more than doubled to 40 square feet, according to Kennedy Lawson Smith, a land-use expert… Abigail Rosenbaum of CBRE-Econometric Advisors also notes that supply growth is flattening. Not much building went on in 2010, and little is likely in 2011 and 2012. But suburban staples like Wal-Mart, Costco and Target are moving into cities, leaving hundreds of big stores empty…

It’s not a pretty picture being painted. The ‘silver lining’, or successful shops tend not to be in traditional strip malls with lots of parking:

Mr McMahon recently observed two Barnes & Noble outlets close to each other in Maryland. The one in a strip mall did less well than the one with no dedicated parking, but near a cycle path and the train. It is surrounded by other shops and restaurants in a sort of town centre, or, as Brandon Palanker of Renaissance Downtowns, a developer, describes it, “a boutique city”.

It is amazing to see what ‘easy money’ has done to our economy. Consider that Alan Greenspan ascended to the throne of the federal Reserve Board as Chairman in August 1987, and sat there until he retired in January 2006. Merging this with the statistic from the article that retail space per person in the US more than doubled from 1990 until now, means this is Alan Greenspan’s legacy. Considering it would have taken a little while for him to change the course of the economy set upon by his predecessor, Paul Volcker, this crisis must be laid at the feet of Mr. Greenspan since it almost perfectly mirrors his tenure. Mr. Volcker had tightened money supply down to choke off inflation. Mr. Greenspan simply turned on the spigot and called the bankers to drink all they could handle.The rest, as they say, is history.


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