While having lunch with my mother yesterday, she told me she’s never seen stores and malls so empty. And she should know – shopping is her favorite pastime.
But you don’t need the keen insights of Mrs. L. to know that the retail sector is struggling big-time. Many malls and shopping centers have more vacancies than they’ve ever had.
With unemployment headed towards the double-digits and the personal savings rate quadrupling since 2007, this is hardly surprising. There’s simply a lot less money sloshing around the retail sector. And this is having a negative trickle-down effect on a couple of other sectors… Commercial real estate is in trouble. Perhaps more trouble than the housing market was when it started its slide. Consider this:
Delinquencies in retail office space have doubled over the past six months. And they’re up 80% in apartments and industrial buildings.
Commercial loan delinquencies have risen from 1% to 5% in the past year. General Growth Properties (Pink Sheets: GGWPQ), second-largest mall owner in the U.S., recently became the largest U.S. real estate bankruptcy in history.
Simply put, commercial landlords are in a jam. With fewer customers patronizing their properties and major tenants closing up shop, there aren’t many options to improve their businesses. After all, it’s not easy to replace a big-box retailer like Circuit City. And the loss of that store leads to declining traffic at the other retailers in the mall. Read more…