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My local area is getting hit with a tsunami of store and restaurant closings. There usually is some after new years every year but this year its just scary. Fairly new shopping centers that looked thriving a year ago are now so vacant they are barely viable. The bad thing is its going to be difficult for commercial landlords to find new tenants these days, leaving these locations vacant for years, which depresses property values. It would seem that we would have seen more of this in 2008 or 2009 when the economy was supposedly at its worst, but retailers that were able to hang on through the recession are now having to shutter. Its surprising because supposedly spending is up compared to late 2008-early 2009. Is this a delayed effect of the recession or are things actually getting much worse?
I think the key is new centers. Because these are mostly newer buildings they are usually found closer to newer housing developments which are where the housing drop has been centered so they are surrounded by a lot of vacant houses and people facing foreclosure. Also the chains and established businesses have been very conservative to this point about expansion. So you see a lot of new concept restaurants and mom and pop operators starting up in a tough environment and they generally don't last long.
Older centers have to become either crime ridden or in an area with declining population not to work. Few tenants will leave after they make it through the tough first few years and then the goodwill they have built with customers. The landlords will generally not raise rents much unless interest rates go up because they are already making good cashflow if the center is older. The wave of the future is likely to keep the older centers and fix them up and stop building newer centers for the most part.
Both landlords (which for a while were mostly REITs, but for now are often lenders...) and businesses look fro signs that an area has sufficient consumer density to support businesses. If there is too much commercial space the stores will not be able to do enough volume to be profitable.
Demographics are a part of it, but studies show that grocery stores with enough customers make similar amounts of money in both affluent areas and those with more modest incomes -- the well off people might go out for meals more often and the more modest income folks might be in the store just for sale items, but everybody still needs something.
You can say the same thing for all kinds of categories, from drug stores to shoe shops to liquor stores and more.
Restuarents are historically among the least likely retail establishments to be profitable, so no surprise when times are tight they close, but as rents decline maybe some one can then afford to "try their dream"...
Yes. Economic indicators are going up, the market has improved drastically, industrial orders are up, unemployment is dropping...but the economy is going to hell since there are some closures at the local mall. I've seen some real stretches to get the doom thinking going, but this is by far the silliest.
Usually businesses file things called quarterly/yearly reports where they detail their operation plans and focus...have you even bothered to look up if it's general operational losses in the area (or across the board), a focus on more profitable locations, or a shift to other profitable ventures?
They aren't exactly fun to read...but it's better to be informed then scared of the world around you.
This entire crisis has permeated through the system.
Fed stimulus money falsely propped up some states last year and was used to create new jobs when it probably shouldn't have.
I think states will be feeling the pinch this year..how drastic is yet to be seen but early headlines show either massive tax increases or massive cuts. Neither of which is pretty.
Once business recovers as it is now, tax revenues will increase though it will take time to trickle through. Where I live, unemployment while high, is below the national level and is stable even with the influx of new residents. We are having major investments in the area of green energy factories and other forms of energy. It depends on where you live and the industries which form the basis of it.
The economy is for the most part staying fairly level, but at a very high price. That price is Government subsidies resulting in huge debt and deficits that must be serviced.
These debts are weakening the dollar, while at the same time QE is pumping trillions of dollars into overseas economies driving commodity prices.
The point is what we are currently doing to support the economy is not sustainable.
It also very detrimental to the average citizen, but extremely lucrative to big banks and speculators. It is typical of the short term thinking that has gotten us into this mess to begin with, and is ensuring that going forward the welfare of the people will be sacrificed for upper class wealth. If you would like a more complete picture of what is really happening, read the article linked to this post.
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All real estate is local...
