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A Random Walk Down What Is Most Definitely Not Wall Street
When I did the first of my Random Walk series, I focused exclusively on the empty storefronts in Manhattan's Madison Avenue Gold Coast area. It was enlightening to many to see just how deep into the heart of the monster the CRE collapse had cut. However, unless you look at the commercial real estate apocalypse unraveling in Central and Eastern Europe you ain't seen nothing yet. Whereas here if you have some spare cash you can buy 400, maybe 500 sq feet of prime commercial real estate in which to sell, uh, sodium hydroxide and lye, if you head east you really hit the jackpot. The problem is truly pervasive across all the countries I visited, but surprisingly nowhere is it as acute as in the EU's most recent (and corrupt) member state, Bulgaria. After a 10 minute rambling trip I saw an astounding amount of brand new, glass walled, hyper modern office towers. Office, after office, after mall, after office, after car park, after office... Complete and total overcapacity meltdown. Nobody wants to touch these even with a Morgan Stanley AAA RE-REMIC. And the funniest thing is that between Raiffeisen and UniCredit, builders of these very offices in 2007 were getting practically free credit at 100% LTV from the Austrian and Italian banks. To get a true sense of how bad it is, take the picture below and multiply by 100x for CRE and by 1,000x for Residential Real Estate, and that's just Bulgaria.
But ignore this house of cards: who cares if all these buildings are generating exactly zero cash... who cares if the problem is endemic to all of Europe - Zero Hedge's old friend Steve Sakwa took the opportunity today to issue a report for ISI in which he praised REITs and was very positive on the sector overall (Zero Hedge will gladly dissect Sakwa's report tomorrow).Overcapacity? The word is banned from the lexicon of all current and former Merrill Lynch employees.
In the meantime, enjoy these pictures of pretty, if completely vacant, office buildings.
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http://www.capital.bg/show.php?storyid=753085
This article mentions expected unemployment to be ~ 20% in there. They also fear social unrest. And of cause the government reassures that those are only speculations : )
The situation has to get truly horrific to see social unrest in Eastern Europe. They went through the fall in communism so they have a thicker skin when it comes to economic hardship. Bulgaria had an economic implosion in mid 90s, after a 5-6 year depression (by western standards). My guess is they'll muddle through 20% unemployment.
A wonderful tour of the max bling when there is no party to be found.... Even the currency swaps from the Fed cannot accomodate this decent into life beyond a currency and ZIRP induced chemical nirvana.
No small wonder the barely leagl girls of the CCE can be found as sushi props at other locations.
Bulgaria will have a new government this month. The real extent of the problems should begin to surface soon - unemployment, budget deficit, etc. The new guys in power will have a good incentive to reveal as much as possible, so that no matter how worse it gets they can blame everything on the predecessors.
http://fistfulofeuros.net/afoe/economics-and-demography/cliff-hanging-in...
Bulgaria is definitely into the maelstrom. It is not pretty and they really have no idea what to do. It´s only a matter of time until the next shoe drops.
Good reminder that this bubble was not just an American event.
There are examples of this all over the world. I'm in China and see it everywhere. Gleaming towers 2-3 years old and never occupied. Saw it all over Europe as well in my visits. And US retail looks to be at 50% occupied. Long time to work this off.
go look in places like Hoofddorp outside Amsterdam,looks exactly the empty office blocks as far as the eye can see..
Thousands of these globally - yet the IYR rises...
mmmgmmm. Panama City same thing. 50 story unfinished spec condos etc
Did you mean Sodium Hydroxide and Fat? After saponification, the pH has to be normalized too. A small amount of H2SO4 can be used to that end.
Major difference europe vs US. The US has roughly 10 times more housing square feet/capita than does europe. But the US has a staggering 20(twenty) times greater stock of retail square feet/capita than does europe. Retaii sales are actually steady in somecountries. Hungary reported a 3% increase in retail sales (courtesy of cheaper currency).
The burbs south of Madrid = clone of all this CEE vacancy
How many useless car dealers can you count?
Once you get off the strip, those pictures look just like Vegas.
Lots of empty office buildings, strip malls.
How about Dubai? They had 25% of the worlds construction cranes at one point (probably still do)! How's that for a leading indicator...
They are still there. It's dry so the damage due to corrosion will be lessened if they sit for a while.