Been shopping recently? Done a drive by of the local strip malls? I did the other night, when we were looking for an anime/manga store my daughter likes to go to in one of the more highly commercialized districts of our city. She couldn’t remember exactly where it was (okay, we were lost) but until we did find it, what struck me was the number of vacant buildings and storefronts, some still with the old logos of the stores that had recently been in business there tattooed on their facades, but many others just shockingly bare, with signs advertising all the available space.
The largest I saw said that the space for rent had 85,000 square feet available, but there were several others that at one point must have housed large retail establishments, and now lay dead, no cars in the parking lot outside. And this was on a Friday night, a relatively busy shopping evening around here.
Well it seems my midsized metropolitan area (roughly 1 million total people) is not an outlier, as the statisticians like to call them. The problem of retail vacancies is a growing one all across the country as many stores downsize or simply go out of business altogether:
According to Reis Inc., retail vacancy rates jumped considerably during the second quarter and its metrics for neighborhood and community centers and for regional malls each hit new highs.
For neighborhood and community centers, net absorption for the quarter amounted to negative 7.9 million square feet—greater than the negative absorption for all four quarters of 2008 combined. The figure was down only slightly from the 8.1 million square feet of negative absorption posted in the first quarter. The vacancy rate jumped to 10.0 percent—the highest level since 1992. […]
On the regional mall front, the vacancy rate hit 8.4 percent—the highest figure since Reis began tracking regional malls in 2000.
Even the wealthiest cities in America are not immune. Here’s a story from the New York Times today describing the effect of greater vacancies in retail space in Manhattan:
[A]s New Yorkers have drastically cut back, the shops that line the streets, from chain outlets to family-run shops, have started to disappear.
The storefront vacancy rate in Manhattan is now at its highest point since the early 1990s — an estimated 6.5 percent — and is expected to exceed 10 percent by the middle of next year, according to data gathered by Marcus & Millichap Research Services, a national real estate investment brokerage based in Encino, Calif. […]
“I’ve never seen such an across-the-board problem,” said Lorraine Nadel, a lawyer who has represented tenants and landlords for 18 years. “Store owners can’t pay their rent, and they can’t keep their businesses going.” […]
The outlook is even worse in other boroughs. Hessam Nadji, managing director of research services at Marcus & Millichap, estimates that vacancy rates in Brooklyn and Queens, currently at 7 to 10 percent, will rise to 12 to 15 percent by year’s end. He said some neighborhoods have been ravaged by vacancy rates of 25 to 40 percent.
We’ve all read the stories of residential developments that have turned into ghost communities of empty homes as foreclosures mounted and many homeowners simply walked away from their mortgages. Now the second wave of the Great Real Estate Abandonment is upon us. How many lives have been ruined, and how many more will be because Wall Street played casino games with the US real estate market? Who can say, but the more small businesses that shutter their doors, the more small business bankruptcies, the more employees let go, the longer the pain will be felt, no matter how much money Exxon Mobil and Goldman Sachs rake in. Wall Street was saved for the “Greed is Good” crowd but they don’t seem inclined to help save the rest of the country. But then again, as they would tell you themselves, that’s not their job. Their job is to make their own bottom line look better not improve the health of the national economy, and when the government gave them money to save their industry that’s exactly what they did:
Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks, according to a new report from the special inspector general overseeing the government’s financial rescue program.
The report, which will be published Monday, surveyed 360 banks that got money through the end of January and found that 110 had invested at least some of it, that 52 had repaid debts and that 15 had used funds to buy other banks. […]
Officials said the program intended to increase the capital reserves of healthy banks, allowing them to make more loans. From the beginning, however, the government invested in troubled banks — most prominently Citigroup — that had publicly announced intentions to reduce lending.
The government has also used the money to encourage mergers, such as Bank of America’s acquisition of Merrill Lynch and PNC’s deal for National City.[…]
… Banks were asked to describe how they used the money, but they were not asked to break down the amounts.
One response, which the report described as typical, said the money had been used “to make loans to credit worthy customers, and to facilitate resolution of problem assets on our books.”
Yeah, bet there’s been a whole lot of facilitating going on. Just ask Goldman Sachs. But money that has found its way into the hands of real people to keep this economy afloat? Hey, don’t you know that to a lot of banks real people, like the ones who operate small businesses or hold mortgages, are just “problem assets” these days? And boy howdy, are we being resolved.
