I remember, back in the day, when I lived in CA, being amazed at seeing abandoned malls: Boarded up windows, weeds in the parking lots. Of course, back then, an old mall got abandoned when a newer, shinier mall got helicoptered onto a concrete pad in the desert. And there was rather a lot of desert. But those days seem to be gone. Stripping out the Austrian stuff and going only with perception:
With retail and office-space rentals down, lots of commercial borrowers are sitting on largely vacant properties that are not producing much in the way of cash flow. Among the more high-profile cases, the WTC 3 tower at the World Trade Center still has not located an anchor tenant, which could put the much of the project on ice. Thousands of strip malls across the fruited plains have empty storefronts, and thousands of office buildings have floor upon vacant floor.
And all those 5-year leases signed in 2007 - 2008 before the bubble burst? Well, er:
Standard & Poor’s [I know, I know] advises: “One-third of maturing loans are for office properties, for which five-year lease terms are fairly common — and if tenants don’t renew these leases, securing new, long-term lease commitments may be more difficult in the current environment. Those leases [were] signed in 2007, at peak rents will likely reset to lower levels as five-year leases roll.” S&P’s bottom line: “50%-60% of the 2007 vintage five-year-term loans maturing next year may fail to refinance, and retail loans are at the greatest risk.”
Translation: Armageddon at the strip mall.
What are the malls like where you are?
NOTE Maine is pretty insulated from the ups and downs: "Depression? We've always been depressed." So we haven't lost any malls, but there does seem to be a thinning out. We lost our Borders, which was one of the best in the country (I don't know what that tells you....), but it got replaced by the (Christianist
) Books-A-Million. Macy's has everything on sale, and then on meta-sale, but the busloads of Canadians aren't coming down here to shop any more. Sears is wobbling...
Anyhow, it looks like there's going to be a ton of space -- especially in the non-urban areas like, oh, New York, Chicago, or Oakland -- that might need occupants...
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Not really
All our vacant malls in the Bay Area were vacant before the downturn, and are in the process of being torn down and redeveloped. Downtown Sunnyvale is probably worst off here, they tore down a run-down strip mall that was downtown right before the downturn, and a large part of downtown has been a fenced-off vacant lot with demolition debris ever since. The main strip in Santa Clara got hit hard when Mervyns went under and Albertson's pulled out, but a Target supercenter is coming at the site of the old Mervyns so that's going to remedy that.
Commercial construction ground to a halt in 2008, but is back now, with several new complexes going up. Part of this is being driven by the expansion of major companies like Google and Apple, but that has a ripple effect elsewhere in the market. For example, Apple bought up the building we're leasing and wants us to move out, we're waiting for them to want us to move out enough to pay our costs of moving out, but at that point we'll be looking for new quarters.
By and large things don't seem so depressed here at the moment, but we *are* the Silly Cone Valley, after all, so with our companies seeing record profits at the moment... (shrug).