Adventures in Capitalism has two articles (and possibly more to come) on the changing face of shopping malls around the USA. They shed sobering light on the issue of debt and how it’s affecting US business and commerce, as we discussed yesterday.
To whet your appetite, here’s an excerpt from the second article.
In the past, retail was retail, warehouse was warehouse and office was office—the same for all other CRE [commercial real estate] classes. There was some cross-over, but the main commercial real estate components stayed segmented for the most part. Now, with big box stores, the lowest hanging fruit for online shopping to knock off, going to dodo-land, there will be hundreds of millions of feet of well-located space suddenly becoming available. People act as if there are enough Ultra Beauty and Dick’s Sporting Goods to go around. However, you cannot fill all of this space with the few big box retail concepts still expanding—especially as many stalwarts are themselves shrinking.
As a result, a huge game of musical chairs is about to take place. Why pay $20/ft for mid-rise office space, if you can now move into an abandoned Sports Authority for $5/ft. Sure, it doesn’t come with windows, but employees like open plan space and there’s plenty of parking. Besides, with the rental savings, you can offer your staff an in-house fitness facility and cafeteria for free. Does your mega-church need a larger space? There’s probably a former Sears or Kmart that perfectly accommodates you at $3/ft. Have an assisted living facility with an expiring lease? Why not move it to an abandoned JC Penney—the geriatrics will feel right at home, as they’re the only ones still shopping there.
Go onto any real estate website and you will find out that huge plan space is nearly free. No one knows what the hell to do with it and the waves of bankruptcy in big box are just starting. As online evolves, these waves will engulf other segments of retail as well.