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Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail 

Retail CRE is highly leveraged and loaded with staggering amounts of debt that rests on leases that are only as good as the retailers' profit-loss statements and solvency.

The decay of the "build it and they will come" model of commercial real estate is gathering speed for a simple systemic reason: the decline is self-reinforcing in several critical ways.

Before we start the analysis, let's ask a basic question: How much of the stuff and services purchased at retail outlets, malls, strip malls, etc. is absolutely necessary and how much is excess consumption?

Conventional "Growth by any means" Cargo Cultists such as Paul Krugman never ask this basic question, because the answer (very little is essential, most is excess consumption) undermines the entire narrative that all growth is good, even the most marginal, unsustainable, wasteful and fiscally imprudent.

I've captured the essence of retail in America with this photo:

Put another way: what if Degrowth is the future, for a variety of structural reasons? If so, the need for billions of square feet of commercial space will implode.

Degrowth, Anti-Consumerism and Peak Consumption (May 9, 2013)

Looming U.S. Retail Implosion: DeGrowth 2014
(December 4, 2013)

There are two primary self-reinforcing dynamics in retail CRE (commercial real estate): consumerist and financial. Let's start with the consumerist dynamic, which is composed of several interlocking feedback loops.

1. As the cost of big-ticket household expenses such as healthcare, energy, college, etc. rises while real income declines for the bottom 90%, households have less disposable income to spend on excess consumption--another tattoo, skinny-triple-mocha-fudge-lattes, 13th pair of shoes, etc.

I addressed the decline in real income yesterday in The First Domino to Fall: Retail-CRE (Commercial Real Estate).

2. The rise of eCommerce is eroding the desire to drive to the mall, strip mall, etc. when the goods can be delivered to one's door by the Brown Truck Store (Mark G.'s phrase).

3. As anchor chain stores and other key retailers reduce inventory and slash investment in maintenance and store improvement, the attractiveness of these physical places declines dramatically. Shopping in a decaying sepulchral cavern with little inventory on the shelves is not very appealing.

4. As chains close anchor stores in malls, foot traffic declines and the feeding chain of smaller retailers starves. The "cool/fun" factor of a mall declines exponentially with store closings. It's just not much fun to stroll through a huge space filled with closed storefronts and few other shoppers. In fact it can be a quite depressing experience.

The financial self-reinforcing dynamics are equally pernicious. Correspondent Chris H. (U.K.) recently described the precarious dependence of property valuations on long-term leases:

The book value of the properties is based on the attainable rents. If just one property in the portfolio has to settle for a lower long-term rental rate, that will devalue the entire 'book to market' portfolio. Just a few low 'book to market' evidence-based valuations and the whole sector could collapse.

One way to dodge that bullet is to not offer any long-term leases. Another is to entice major tenants to sign high-value leases with various guarantees (that the mall will maintain a certain occupancy rate, etc.).

The primary point here is that CRE is highly leveraged and loaded with staggering amounts of debt that rests on leases that are only as good as the retailers' profit-loss statements and solvency.

As Mark G. noted in his overview After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects, the standard commercial real estate loan is not a 30-year mortgage; it's a short-term mortgage ( 5 to 10 years) with a huge balloon payment that's due at the end of the term--a balloon payment that requires refinancing.

That need to refinance will force lenders to examine mall owners' leases and the valuations that are based on high occupancy and lease rates. As anchor tenants vacate and smaller tenants close up in their wake, how many of these retail properties will justify their previous valuations? What happens to these properties when the balloon payment can't be paid because the owners cannot refinance?

There are three other financial factors to consider:

1. Many of the healthiest malls are "premium outlets" that cater largely to foreign tourists and the dwindling class of upscale American households. Should a global recession occur, tourism will take a hit, along with the ability of foreign tourists to buy thousands of dollars of luxury brand handbags, etc.

2. Since the top 10% of U.S. households is heavily dependent on bonuses, ownership of stocks, real estate appreciation, etc. for their income gains, a rollover in equities and residential real estate would negatively impact the "wealth effect" that has powered their five-year long shopping spree.

3. Much of the "growth" reported by retailers has resulted from poaching existing store sales: The American Model of "Growth": Overbuilding and Poaching (November 19, 2013).

Once the wheels fall off this model of "growth," chains will enter a cycle of closing marginal stores to boost profits. That will place additional pressure on retail properties as once-reliable chain tenants exit marginal properties en masse.

 

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Wed, 01/22/2014 - 12:25 | 4355543 So Close
So Close's picture

Less jobs, stagnating wages, more online shopping, and aging population = Bad for retail.  

Wed, 01/22/2014 - 12:27 | 4355555 LawsofPhysics
LawsofPhysics's picture

The manufacturers of adult diapers and their salesforce disagree with your conclusions.

Wed, 01/22/2014 - 12:48 | 4355623 jbvtme
jbvtme's picture

correct me if i'm wrong (as i'm sure you will) but wouldn't these vacant malls make excellent detention centers for political malcontents?

Wed, 01/22/2014 - 13:02 | 4355684 BoNeSxxx
BoNeSxxx's picture

I was just thinking about this very topic the other day as I wandered from room-to-room in my house... How much is crap vs. how much I would actually take with me if I cared about it...

I concluded that everything I gave two shits about would fit neatly into a small duffelbag (not counting the means to defend said duffel).

And, yes, you are correct.  The next boom will be 're-purposing' these malls... penal colonies, subsidized housing, indoor farms, who knows?

Wed, 01/22/2014 - 13:15 | 4355747 jbvtme
jbvtme's picture

i'm down to reading glasses and toilet paper

Wed, 01/22/2014 - 13:27 | 4355757 Headbanger
Headbanger's picture

Empty malls would make for great indoor shooting ranges!

Can you imagine shooting some 300 yards indoors in the middle of winter!?

But then too, I like shooting in snow.  I must have fought on the Eastern Front in a previous life. Not sure on which side though!

Wed, 01/22/2014 - 13:42 | 4355814 New World Chaos
New World Chaos's picture

Biker gang headquarters.

Big spaces for burnouts, races, and of course shooting.  Wide kill zone outside.  A few easily guarded entrances.  Little side rooms with roll-down bars could be used as dungeons, meth labs, whatever.

Wed, 01/22/2014 - 14:06 | 4355898 Headbanger
Headbanger's picture

Don't forget go cart courses for the biker kiddies!

And how could you leave out tattoo shops, motorcycle repair and accessory shops, leather shops, pizza and pool halls!!??

Wow... That could easily fill the whole Mall of America along with a few bordellos, movie theaters (Easy Rider always showing)

Plus chain martial arts studios, a Hard Rock Cafe, ... and a monster truck arena!

 

Wed, 01/22/2014 - 14:11 | 4355956 Son of Loki
Son of Loki's picture

"They didn't build that!"

Wed, 01/22/2014 - 14:31 | 4356014 Dr. Richard Head
Dr. Richard Head's picture

Based on the trends I have witnessed coast-to-coast, I would venture a guess for repurposing into brothels, gambling joints, and pot shops, along with Japanese-style coffin bed appartments. 

Wed, 01/22/2014 - 14:47 | 4356032 Manthong
Manthong's picture

Right now, I am rushing out to buy..  

nothing.

oh.. but if anybody has any extra factory mags for a Beretta 96 to sell, I am a buyer.

Wed, 01/22/2014 - 15:47 | 4356289 0b1knob
0b1knob's picture

Is the end game of this that Walmart is the last retailer standing and uses its monopoly status to screw the public?

Wed, 01/22/2014 - 16:04 | 4356366 Headbanger
Headbanger's picture

How about Japanese style brothels, gambling joints and sushi shops??

Wed, 01/22/2014 - 18:14 | 4356851 Manthong
Manthong's picture

Attention K-Mart shoppers.. Under the flashing blue light..  a special on little Asian girls?

Wed, 01/22/2014 - 14:13 | 4355966 FEDbuster
FEDbuster's picture

Classic Blues Bros mall chase:  http://www.youtube.com/watch?v=RTRXnuoK1ss

Wed, 01/22/2014 - 14:47 | 4356063 Pure Evil
Pure Evil's picture

Well, in our little West Coast Florida town this has already happened and more.

We had four major chain stores and three of them have already vacated the premises, the last two closed shop just within the last four months.

The remaining anchor store Kmart may be on the list to be closed ever since Walmart opened up its first super store and then added two more stores.

Whenever I go to the mall its deader than a doorknob and Kmart barely has anyone shopping in it. Of course the store is located in a sparsely populated corner of the county while the Walmarts all built locations next to heavily populated areas.

There are still smaller retailers but quite a few have called it quits. In what was once the Sears anchor store an indoor golf course has been opened but I didn't see to many paying customers playing indoor golf, and mostly kids with no money except what the parents give them.

Wed, 01/22/2014 - 14:50 | 4356074 corporal
corporal's picture

Notice they broke OUT at JC Penny.

Wed, 01/22/2014 - 19:01 | 4356902 Manthong
Manthong's picture

I have shopped there.. albeit prior to the time they shuttered it and it became a great movie set.

Speaking of shopping, tomorrow I get to pick up the sweet little Laser-Max thing that I can plug this here Ruger BX-25x2  into. 

When the SHTF.. this is the piece I toss to the missus.

At close range 50 x .22 is as good as a few .45 ACP's, .40 S&W or even a .50 BMG or two.

:-D   -    embrace the fantasy 

http://www.youtube.com/watch?v=Bd9QDucsCS8

gee.. after having actually watched this last video, it is amazing to note the affinity the piece has to my physiology..

Ron Jeremy, eat your heart out..   :-)

Wed, 01/22/2014 - 13:17 | 4355760 max2205
max2205's picture

Teardown the mall and build McMansions....fixed it

Wed, 01/22/2014 - 14:09 | 4355940 Handful of Dust
Handful of Dust's picture

"Earth to earth, ashes to ashes, dust to dust."

Wed, 01/22/2014 - 17:39 | 4356641 0b1knob
0b1knob's picture

"Ashes to ashes, fun to funky"

"We know MajorTom's  (Choomboy) a junky"

Wed, 01/22/2014 - 14:50 | 4356073 Uncle Remus
Uncle Remus's picture

"Tear down the mall! Tear down the mall! Tear down the mall!"

Wed, 01/22/2014 - 15:35 | 4356241 ebear
ebear's picture

"Mr. Gorbachev - tear down this mall."

Wed, 01/22/2014 - 14:12 | 4355960 yrad
yrad's picture

I heard Cramer (yes, I watched Squak this morning) say that CRE was a "bright spot" in the economy. Head, in, sand...

Wed, 01/22/2014 - 14:16 | 4355977 FEDbuster
FEDbuster's picture

"Head in sand", corrected, Head in ass...

Wed, 01/22/2014 - 14:50 | 4356077 Uncle Remus
Uncle Remus's picture

...that was pre-packed with sand.

Wed, 01/22/2014 - 15:04 | 4356058 hedgeless_horseman
hedgeless_horseman's picture

 

 

i'm down to reading glasses and toilet paper

You beat me.  I am only down to this:

  1. Knife
  2. Rx glasses
  3. Bible
  4. The Complete Works of Shakespeare (unabridged)
  5. Sidearm
  6. Toothbrush
  7. Pencils
  8. Notebook
Wed, 01/22/2014 - 15:05 | 4356121 Uncle Remus
Uncle Remus's picture

What, no copy of the constitution?

Wed, 01/22/2014 - 15:39 | 4356134 hedgeless_horseman
hedgeless_horseman's picture

 

 

It is really not necssary, thank you.

If I like my natural rights, I can keep my natural rights.  No receipt is required.

However, that is why I like to have a firearm.

Wed, 01/22/2014 - 15:46 | 4356283 Uncle Remus
Uncle Remus's picture

I see. Well, good luck with scaling that up.

Wed, 01/22/2014 - 21:53 | 4357530 Uncle Remus
Uncle Remus's picture

The devil is in the details of "like-minded" people.

Wed, 01/22/2014 - 17:21 | 4356699 GeorgeHayduke
GeorgeHayduke's picture

Good thinking on the Bible. Could be used for lighting fires or toilet paper, yet all bound together in one tight package.

Wed, 01/22/2014 - 13:50 | 4355862 insanelysane
insanelysane's picture

"The next boom will be 're-purposing' these malls... penal colonies, subsidized housing, indoor farms, who knows?"

Up the street from where I live is a public park that still has the remnants of the poor farm that once existed there.  The public poor farm was where the local homeless could live and work the land to grow food which they could eat or sell.  The malls of today could easily become poor farms of the present.

Wed, 01/22/2014 - 14:05 | 4355929 El Vaquero
El Vaquero's picture

While that might actually make sense, try to do that now in a lot of places and the place will get shut down for violating one government regulation or another.  You know, the rules must be followed because they're rules and provide some bureaucrat with a job.  Who gives a fuck if people starve, right? 

Wed, 01/22/2014 - 14:25 | 4356004 upWising
upWising's picture

Municipal Code Enforcement StasiCrats come down on "front yard farmers" with the Amercian equivalent of the wrath of Old Testament Gawd in a Pissed Off Mood NOW.

SURELY you are not suggesting such a regressive move as REMOVING Perfectly Good Asphalt Parking Lots (unused, but that is beside the point) to PLANT FOOD?  You would suggest that we ALLOW rain water to percolate "naturally" back into the aquifer free of parking lot run-off?  You would PROPOSE to do something so Subversive and UnAmercian, and I imagine you would do it WITHOUT an Environmental Impact Report as well!!

Obviously you just don't Love Amercia as much as General Growth Propeties (which owns dozens of "Exciting Shopping Destinations") loves Amercia.

Don't Forget :: "Amercia is Jesus' Favorite Country!" ©

Wed, 01/22/2014 - 15:22 | 4356185 donsluck
donsluck's picture

My god, dig up asphalt to grow food on polluted sub-soil. Ridiculous. It will stay a waste land.

Wed, 01/22/2014 - 16:16 | 4356418 Matt
Matt's picture

Raised beds in garden boxes seems the most practical way to recover the land. Much less effort than digging it all up, too.

Wed, 01/22/2014 - 18:11 | 4356846 SDShack
SDShack's picture

No, grow lights inside where it is nice and warm. Pot growers dream and necessary when weed is legalized across the country. Weed is going to be the new perfect big ag business in the USA because it will be Urban Ag. Hell, Monsanto is probably working on GM strains of it right now to corner the market.

Wed, 01/22/2014 - 20:51 | 4357324 FEDbuster
FEDbuster's picture

Maybe JCP can convert all those failing mall stores into giant indoor pot farms.  Turn the cosmetic counters into Hooka bars? 

Wed, 01/22/2014 - 14:15 | 4355972 insanelysane
Wed, 01/22/2014 - 14:27 | 4356008 TuPhat
TuPhat's picture

It wouldn't be very effective to grow food on asphalt parking lots.

Wed, 01/22/2014 - 16:15 | 4356422 7 of 15
7 of 15's picture

I tried once to grow a garden on formerly paved land. Essentially you have to dig a hole deep enough so water will drain and then refill the hole with 'new' dirt.  Otherwise it’s like growing in a bucket.

Apparently they use soil stabilizers (lime? Calcium Carbonate?) under the asphalt.

Wed, 01/22/2014 - 22:00 | 4357554 StychoKiller
StychoKiller's picture

Aquaponics FTW!!

Wed, 01/22/2014 - 14:05 | 4355925 Matt
Matt's picture

Repurposing, probably, although more likely in the form of mass squatting than organized government programs. Detention Centers? Maybe, I don't know how well those gate-fence things they pull across work. Also, if they have those foam ceiling tiles with a big crawl space overhead, even if the walls are concrete the place will be insecure. Would require a lot of renovation, I suspect.

Wed, 01/22/2014 - 15:50 | 4356299 JLee2027
JLee2027's picture

Everyone knows the next boom is alredy here. Apartments! and lots of them. No more houses, that was so...90's.

(Pssst. Coming soon a shed of your own on the trillionaires property w/low financable ground rent).

Wed, 01/22/2014 - 18:13 | 4356852 SDShack
SDShack's picture

Almost, empty retail malls will be FEMA camps in the New Feudal World Order. A cross between the Superdome in Katrina and Thunderdome.

Wed, 01/22/2014 - 16:37 | 4356527 logos5
logos5's picture

People were always disappointed with the answer they got from my father when they asked him how he made all his money... "By not spending it." Was his reply.

Wed, 01/22/2014 - 18:29 | 4356897 the tower
the tower's picture

I live in a small flat downtown, the money I save by not byung tons of crap I spend at sole proprietor shops, restaurants, bakers, and on quality products that last...

Wed, 01/22/2014 - 14:02 | 4355909 grunk
grunk's picture

Blues Brothers sequels.

Wed, 01/22/2014 - 14:12 | 4355950 Headbanger
Headbanger's picture

"The new Oldsmobiles are in early this year!"

http://www.youtube.com/watch?v=IIdGxR-aU6o

Wed, 01/22/2014 - 15:30 | 4356220 Occams_Chainsaw
Occams_Chainsaw's picture

FEMA mini-mall zones....that's the ticket!

Wed, 01/22/2014 - 15:49 | 4356302 RafterManFMJ
RafterManFMJ's picture

Boy, this FEMA MALL PRISON sucks, buy, hey, Auntie Anne Pretzels! 

Wed, 01/22/2014 - 16:12 | 4356403 kchrisc
kchrisc's picture

"Welcome to the old Best Buy location. Those selected for 'showers' leave your belongings here and follow the policeman down into the 'shower' room."

 

"The biggest plague to mankind is blind obedience."

Wed, 01/22/2014 - 22:03 | 4357566 wolfen
wolfen's picture

Or weapons and tactical training centers for said malcontents.

Wed, 01/22/2014 - 12:50 | 4355636 AlaricBalth
AlaricBalth's picture

February 17, 1985 - The Malling of America

"Malls and television reinforced each other by preprogramming the Baby Boom generation to get on with the great American pastime, ''earning their wings as junior consumers,'' sharing shopping dates and the thrills of buying. Customers became worshippers, a credit-card constituency voting with their feet and wheels. What television proposed, the mall disposed."


Wed, 01/22/2014 - 14:02 | 4355906 Miffed Microbio...
Miffed Microbiologist's picture

It's funny, as a kid in the 1970s, going to the mall was such a treat. We went once in summer to buy school clothes and once for Christmas shopping. The malls never seemed on the verge of collapse.

As kids we spent most of our time having Huck Finn adventures and racing home for family dinner or there would be hell to pay.

Now kids just live at a mall. I thought that was sad until I see them now living there and texting each other. I wonder if these kids have ever hiked in the forest or mountains once in their lives. No wonder there is so much depression in youth today.

Miffed;-)

Wed, 01/22/2014 - 15:25 | 4356149 cbxer55
cbxer55's picture

Sounds like your childhood life was close to mine. There was a mall not too far from where I lived as a kid in NJ. I could ride my self-purchased ten speed there if I desired. Always had better places to go than a mall though. Airport anyone? Parents rarely went there as well. Good thing, it influenced me when I got older.

Lived n CA 26 years. A huge new mall was built in my city of Palmdale in the 80's. Went there one time. ;-)

Here in Oklahoma City, there are four malls, three of which are on the website Deadmalls.com. ;-)  LOL

The one closest, has a Sears still there. That's it. There is a Life Church, or something like that, in what used to be a corner J.C. Penney's. ;-)

The one that is still "thriving", I've been there once, years ago. Have not been in a mall in at least five years. ;-)

Notice the number of :-)  I hate malls. ;-)

May they go the way of the dinosaurs!

Besides, all the malls here are No-Gun zones. No guns allowed, permit or other. I do not do business in anyplace my gun is not allowed. Concealed and Open carry is allowed here now, and as one who likes Open Carry, any business that posts NO GUNS is on my shit list. Amazingly, except for the malls, there are very few places posted as such. I carry a Kimber 1911 in .45ACP. It usually goes totally unnoticed.

Wed, 01/22/2014 - 15:59 | 4356346 nc551
nc551's picture

In my state (check the laws in yours) carrying in a no-gun zone is a simple trespassing misdemeanor and I've never heard of anyone having charges pushed by a property owner for saving the day, including banks.  IMO there is no reason to go out of your way to follow illegal laws, especially when the risk factor is so low.

Wed, 01/22/2014 - 16:16 | 4356424 cbxer55
cbxer55's picture

It's the same in Oklahoma. USed to be a felony, but thatnks to activists from the website OpenCarry.com, a new law was recently signed making it a as you stated. So if you carry concealed, which I sometimes do (prefer Open Carry), you cann go unnoticed in most places that post NO GUN placards. I've done it myself. But there are far too many cops loose in the malls. No need to step foot in one in this lifetime, ever again.

Wed, 01/22/2014 - 22:00 | 4357557 Uncle Remus
Uncle Remus's picture

I've seen a few "No OPEN Carry" signs in OK bidnesses. I carry concealed unless I am at the range.

Wed, 01/22/2014 - 16:39 | 4356530 Miffed Microbio...
Miffed Microbiologist's picture

High five from me to you! I absolutely hate malls myself. So sterile and impersonal. I rarely go too. Most of my purchases are made either at independent businesses or at the farmers market.

I wouldnt patronize a no gun zone area either. I complained to 2 sheriff friends about the difficulty getting concealed carry here, they laughed. " It's only a misdemeanor" wink wink. So I know many must be violating the law. I noticed all the guys working at the shooting range no longer open carry. When I asked why they said the owner felt it scared the patrons! Had to really laugh at that.

Funny thing, when kids comment to me how boring it must have growing up without cell phones and internet. I tell them some of my adventures and they're absolutely gape mouthed. " My parents would NEVER let me do those things! That was so unsafe!" Sometimes I'm not sure how I made it to adulthood unscathed doing all those crazy things. We sure had fun and enjoyed our unregulated, free childhoods.

Miffed;-)

Wed, 01/22/2014 - 15:51 | 4356307 RafterManFMJ
RafterManFMJ's picture

Read years ago, likely on the 'hedge, a story that noted French retail space was 1/9 that of the US per capita.

And I thought then, as I do today, what a fucked up place we live in.

Wed, 01/22/2014 - 12:44 | 4355603 Renfield
Renfield's picture

Ghost malls, in soon to be ghost cities, surrounded by ghost condo towers, with entire floors held by ghost flippers with ghost mortgages. All sitting on top of hundreds of acres of fertile farmland and demolished neighbourhoods. Looks like what worked so well for China, is going to work just fine over here.

Wed, 01/22/2014 - 14:04 | 4355910 29.5 hours
29.5 hours's picture

 

 

I predict a revival of malls in Argentina:

 

"Individuals are allowed to buy items up to the value of $25 (£15) from abroad tax free every year. Once the $25 level is reached, online shoppers in Argentina need to pay a 50% tax on each item bought from international websites. "

http://www.bbc.co.uk/news/world-latin-america-25836208

Ok, you're right...attacking the right to buy online won't help neighborhood malls at all...

 

 

Wed, 01/22/2014 - 14:46 | 4356060 teolawki
teolawki's picture

Long demolition companies.

Wed, 01/22/2014 - 16:19 | 4356432 BuddyEffed
BuddyEffed's picture

Nature demolishes for free.  Just takes a while sometimes.

Wed, 01/22/2014 - 12:49 | 4355625 Renewable Life
Renewable Life's picture

This is my favorite CA cocktail conversation and I've been harping on it since the bust in 2008!!! I'm glad finally some media types are picking up on the obvious here!

What everyone is still missing, is these malls are MUCH more then just retail outlets for junk and overpriced exuberance, they are the leveraged collateral in this bankrupt system, they are domino ONE, and when they start falling, that will be your que to exit the building quietly and head to your compound in the country!!!

Wed, 01/22/2014 - 13:05 | 4355702 BoNeSxxx
BoNeSxxx's picture

And everyone with a compound in the country raise your hand...

 

OK,... I have one. 

Wed, 01/22/2014 - 13:17 | 4355755 jughead
jughead's picture

That you have a tube of compound W in a medicine cabinet in the USA does not count.

Wed, 01/22/2014 - 14:02 | 4355786 Headbanger
Headbanger's picture

I'm working on buying  a nice used submarine too.

Maybe a nice used Soviet diesel cause that nuculear shit of theirs isn't exactly too well built.

 

Wed, 01/22/2014 - 13:34 | 4355806 NotApplicable
NotApplicable's picture

Sorry, but that determination can only be made by the press.

Wed, 01/22/2014 - 13:37 | 4355822 Renewable Life
Renewable Life's picture

Me too!!!

Because if you think the stock market looks "leveraged" today, dig into some of these REITS and other GS toys that are out there, not to mention the existing valuations on these "mall operators" and see what those valuations are connected to, in leveraged products etc!!

I'd guess its around 250 to 1 if its a penny, and it could be worse in places like CA, FL, NY etc!

So when JCP and Sears stops paying $4 a Sq Ft on these 60,000 sq ft stores, month over month, lets see who gets there shit called on what!

Wed, 01/22/2014 - 15:54 | 4356323 Almost Solvent
Almost Solvent's picture

Even at just .50$ per sq. ft. you're talking $30,000 for an average size Mall Anchor Store.

 

$30,000 x 12 =$360,000 minimum annual loss in revenue from just one Mall Anchor Store closing. But that usually leads to others, so make it a $500,000 loss per year.

CRE/REIT landlords can't afford even that since the property taxes and utilities still need to be paid even if the tenant is long gone, lest the pipes burst or the County taketh away the whole thing in tax foreclosure.

Wed, 01/22/2014 - 13:57 | 4355891 Nobody For President
Nobody For President's picture

I have one also, but I don't call it a compound. It's my forty. Pruning the fruit trees today. Got drought this year, but spring still OK.

Wed, 01/22/2014 - 15:01 | 4356109 dirtscratcher
dirtscratcher's picture

 

Hand raised. Not sure if it's a 'compound' or not. Four acres with two acres of it pasture, irrigated with well water; pigs  & sheep & dairy goats; solar PV; solar hot water; two dozen fruit trees and about 4,000 sq. ft. veggie gardens. It used to be defended with evil assault rifles and backed by gold until that doggone boating accident.

Wed, 01/22/2014 - 16:33 | 4356493 kchrisc
kchrisc's picture

My 1913 two cents, but all those with "compounds" should also make sure to do a "tactical survey."

Basically from various occupied points, imagine scenarios of attacks and look for line-of-sight blockages, eliminate natural defensive positions for attackers and build or improve defensive positions for you and yours. Also assume the role of attacker and make same observances and changes.

That doesn't mean building bunkers and such, but just becoming aware of tactical problems and eliminating or changing them as time and resources permit.

 

"If you have to pay to keep it, you don't own it."

Wed, 01/22/2014 - 15:38 | 4356255 DontGive
DontGive's picture

'Tis true, the leverage on these babies is substantial.

 

Another sale comin, but this time it will be the malls themselves, not the junk inside them.

Wed, 01/22/2014 - 13:16 | 4355754 TheRideNeverEnds
TheRideNeverEnds's picture

And apparently super bullish for stocks.

 

Wed, 01/22/2014 - 13:42 | 4355841 midtowng
midtowng's picture

It's also the end of suburbia.

Most of those malls are in the suburbs. Their implosion means a lot of jobs, even if they are low-paying, are vanishing from the burbs.

Combine that with gas prices that will never fall significantly, and we will see the gradual end of a suburban experiment.

Wed, 01/22/2014 - 15:18 | 4356165 Freddie
Freddie's picture

Hope & Change - Kenyan economy style.

Wed, 01/22/2014 - 22:09 | 4357590 JuliaS
JuliaS's picture

What I recall from reading Ludwig Von Mises is that overproduction is impossible without fiat fueled credit booms. When money that shouldn't exist artifficially inflates the demand, producers get the wrong signal. They start making goods that shouldn't be made, malls get built that shouldn't be built and people get employed in service occupations where they shouldn't be employed. Everything's distorted.

Yes, there is a crisis - all the things disappearing that shouldn't have existed in first place.

Wed, 01/22/2014 - 12:25 | 4355544 kliguy38
kliguy38's picture

Looks like a buying opportunity......CNBS needs to do spot on this opp NOW!! Joe Keirnan LIVE

Wed, 01/22/2014 - 12:26 | 4355548 Ulterior
Ulterior's picture

where do I short?

Wed, 01/22/2014 - 12:29 | 4355562 NoDebt
NoDebt's picture

JCP, SHL

Wed, 01/22/2014 - 12:36 | 4355584 Winston Churchill
Winston Churchill's picture

There must be a way to short this.

CDS cover on the CMBS trusts could be one way.

Need more info on loan sourcing for these white elephants.

I know CMBS was not as widespread/dominant  as RMBS but I can't find

figures anywhere.

Breakndown on financing  please CHS ?

Prolly cannot do because of MERS strawman.

Wed, 01/22/2014 - 12:26 | 4355551 Jayda1850
Jayda1850's picture

Have not been to a mall in 3 years. The internet has killed that business model.

Wed, 01/22/2014 - 12:45 | 4355614 ThisIsBob
ThisIsBob's picture

I drive by several large malls on my way to Goodwill.  WTF do I need new jeans for?

Wed, 01/22/2014 - 15:26 | 4356207 gwar5
gwar5's picture

I love Goodwill!  I get shirts by the dozen there for $1/ea in the Spring to work the hobby farm and I always make sure to give them my junk when I clean out my closets. 

I also bought a pair of size 14 boots at Goodwill. I leave them muddied on the front porch with a sign that says "daysleeper" so that anybody coming unannounced to the front door while I'm not there will think twice about pissing off a giant. 

 

 

 

 

Wed, 01/22/2014 - 12:50 | 4355630 TheMeatTrapper
TheMeatTrapper's picture

Yep. I can get exactly what I want on Amazon. I can read reviews from product users, ask questions and honestly answer questions for others. I can have the product delivered to my door. I save gas and don't pay sales tax. I can shop at night at my convenience. 

Why the hell would anyone want to drive all over town looking for a particular item, put up with vapid, lazy assed clerks who know nothing about anything in their store and put up with trying to navigate around huge crowds of jobless, fatass, pierced and tattood Americans who meander as slowly as possible down the mall. 

Going to the mall is a miserable experience and a reminder of how fucked up and useless our people have become. 

We do have one gunshop in town here and they maintain an amazing inventory, have knowledgable staffers and if they don't have what you want they will get it. You can touch the merchandise, try it out and get real feedback from them. Interested in that knife sharpener over there? They'll pull it out and let you try it out to see if you like it. I shop there a lot. Of course, this is a sole proprietorship and not a chain store - which explains the difference. 

Wed, 01/22/2014 - 13:58 | 4355895 SilverRhino
SilverRhino's picture

The only reason I go to the mall is when I want to physically handle a product before purchase.   Then 99% of the time I can go online and order it to avoid sales tax (and shipping is usually close to free if it's big enough)

The exception is my local ecig store in the mall.  Good people, nice veteran discount (20%) and good environment to learn how to mod / rebuild stuff.   

 

Wed, 01/22/2014 - 13:37 | 4355818 tarsubil
tarsubil's picture

I went before Christmas to just walk around. Didn't buy anything though. Maybe they can become historical sites?

Wed, 01/22/2014 - 13:56 | 4355890 Things that go bump
Things that go bump's picture

All those empty parking lots would be great locations for raised gardening of vegetables. 

Wed, 01/22/2014 - 15:32 | 4356232 James-Morrison
James-Morrison's picture

The vegetable gardens will be tended by the Chinese immigrants, who come to the U.S  after we default on our debt and China finishes the "Land for Debt" deal hidden in the TPP.  

Some of the vacant strip malls will be converted to light factories, so the shit we buy can be built here (by Chinese Immigrants) No need to ship across the big-blue-wet thing if everything is built in our backyard, the good old USA, or is it CSA (Chinese States of America) 

Win-Win for everyone! (Umn, ....well almost everyone.)

Wed, 01/22/2014 - 15:33 | 4356234 donsluck
donsluck's picture

I cannot believe how common this conception is, except to gardeners, who know what a labor intensive and inefficient idea parking-lot-to-garden conversion is.

Wed, 01/22/2014 - 16:10 | 4356395 Things that go bump
Things that go bump's picture

I never said it wouldn't be a lot of work. What else are we going to have to do with ourselves if there is no employment to be had. There are many Hmong immigrants in my region, bless them. They like to rent plots of undeveloped land and grow gardens there. They sell a lot of their produce at farmers' markets. I suspect that they have to haul water when its dry. One women I used to work with told me that in the summer she never went into the house until after dark and lived for the feel of dirt and growing things in her hands. She was especially proud of her ducks, which she sold to local restaurants. I suspect she had to work for the benefits, but her life was wrapped up in that garden. 

Wed, 01/22/2014 - 17:09 | 4356654 TheMeatTrapper
TheMeatTrapper's picture

I grew up thinking I knew how to skin a squirrel. I learned from Hmong farm laborers that skinning a squirrel is a waste of perfectly good, nutritious, tasty skin. They also tuaght me how to snare rats. They loved'em.

Wed, 01/22/2014 - 13:38 | 4355825 NotApplicable
NotApplicable's picture

It's nice and quiet there when I go to Sears for new tires. I went on a Friday afternoon two weeks before Christmas, and the place was a ghost-town.

I'm starting to question the risk I took at purchasing a three year alignment, though. They might burn through all of their cash/credit before my time is up.

Wed, 01/22/2014 - 15:14 | 4356147 WillyGroper
WillyGroper's picture

The mall has at least one good purpose.

You can walk inside free from breathing that isidious poison being sprayed in the air.

That is if you can get around lard ass slugs walking 6 across.

Wed, 01/22/2014 - 15:17 | 4356163 gwar5
gwar5's picture

I hate American malls, but did go to  the "Mall of Asia" in Manila (largest mall in Asia) just before Christmas. It was nice and well attended, cheap prices. Very few punks, mostly families and young singles looking to meet others. People are poor but they dress up to go because it's a big deal for them to be there. Different crowds than American malls and economy still good there.

Wed, 01/22/2014 - 12:27 | 4355553 DrunkMath
DrunkMath's picture

Much of the population of any mall isn't buying anything.....it's a hang out, and indoor HEATED public space.  The place with the highest population of people is typically the food court.

http://www.scadinvest.com/blog/2014/1/20/the-death-of-retail

Wed, 01/22/2014 - 12:53 | 4355641 nuclearsquid
nuclearsquid's picture

FEMA and DHS should start snatching up malls to use as camps for the sheeple.  Plenty of outdoor exercise space in the parking lot, a convenient mass feeding trough with popular favorites like Sbarro's, a community-reinforcing layout to help keep them docile.  The best part is, there will be plenty of space for the Soma dispensary.  The vacant Nordroms, with their huge open certral space, would be perfect for soylent rendering plants.

 

Wed, 01/22/2014 - 13:40 | 4355830 NotApplicable
NotApplicable's picture

Start???? By now, the Fed likely owns them outright.

Wed, 01/22/2014 - 13:05 | 4355703 Shad_ow
Shad_ow's picture

Many of the "hangouts" are undesirables, thugs and usually teenagers who do not buy anything other than sodas.

Wed, 01/22/2014 - 13:21 | 4355766 Bill of Rights
Bill of Rights's picture

I walked through the mall during the Holiday season first time in a mall in 10 years no bullshit. Well all I seen was scantly clad teens In Northface Jackets and Lululemon Yoga pants.  Didn't leave much to the imagination that's for sure, it looked like a soft core Porn flick tryouts.

 

Oh and no one was buying anything no bags in hand just walking and gathering in the corners

Wed, 01/22/2014 - 12:28 | 4355559 order66
Wed, 01/22/2014 - 18:49 | 4356948 IREN Colorado
IREN Colorado's picture

Even your chart shows online sales are only around 4-7%. That leaves over 90% of the market for traditional retail. The real problem is all 100% of the retail market (all types) is smaller in QE inflation adjusted dollars than it was just a few years ago. Real income is at the 1980's level and sliding. Gov't subsidies are carrying the economy along with bankster bucks for the wealthy. Funny but only gun/ammo sales are showing real increases because of a shift in "priorities". 

Online sales actually supports the economy by allowing interesting products to bypass traditional brick steel stores to get to the market. I recently bought a real cool back pack stove that I won't see in REI for many years, if ever. With the electronic tablets look how many new writers are getting printed, and they are actually getting paid for their work. That is good for writers and bad for publishing houses and printing press operators. Quel Dommage!

That thumping sound we hear in the distance is the lower floors collapsing as the great sky scraper of the US economy settles into it's basement. 

Pray for the Republic.

Wed, 01/22/2014 - 12:31 | 4355568 dick cheneys ghost
dick cheneys ghost's picture

come on people......think like a bankster fascist....these empty malls will make excellent FEMA Camps

Wed, 01/22/2014 - 12:50 | 4355631 Skateboarder
Skateboarder's picture

It even comes with a food court with brands everyone is used to. It'll be like we never left!

Wed, 01/22/2014 - 12:55 | 4355653 Emergency Ward
Emergency Ward's picture

"Hot Dog on a Stik" will keep 'em happy.

Wed, 01/22/2014 - 13:58 | 4355893 andrewp111
andrewp111's picture

That and pretzel dogs. The pretzel kiosk is the only thing that always has a line of customers.

Wed, 01/22/2014 - 14:04 | 4355923 HardlyZero
HardlyZero's picture

Some addresses will have rebuilt Frappiccino dispesers and frozen frape' treats.

Wed, 01/22/2014 - 15:23 | 4356194 Freddie
Freddie's picture

Will these fascist let us skateboard there?  Probably not.

 

Wed, 01/22/2014 - 12:33 | 4355577 jubber
jubber's picture

who are the main REITS these days in this? ta

Wed, 01/22/2014 - 12:37 | 4355587 L_Conquistador
L_Conquistador's picture

SPG

Wed, 01/22/2014 - 12:50 | 4355632 tip e. canoe
tip e. canoe's picture

for shits & giggles, check out a 5yr chart on GGP (General Growth Properties).

+1,100% increase since the day of S&P 666.

Wed, 01/22/2014 - 13:00 | 4355658 Emergency Ward
Emergency Ward's picture

NNN, O are a couple of companies (not the largest caps)....both 25-30% off peaks....

Wed, 01/22/2014 - 12:35 | 4355581 OldE_Ant
OldE_Ant's picture

Degrowth - haha.  Almost there..

Simple answer is a transition away from outlets to internetlets.  Pretty damn simple.  I and many others predicted this during the great web rush of 1995/1996.  I also predicted it would take about a generation before the real effects of the new technology would take hold.  Newspapers, just about everything in print, media goes shortly after.   Oh and guess what the whole setup leads to significantly reduced profits/margins for companies playing in those markets.  Ultimately internet/computer industry will start eating itself as well.   Get ready for those disposable computers and displays as well as other shit.  They are coming.  It's the only way to keep the system pumping for maybe another generation.

As to over consumption - a simple look at what is sold in local auctions and prices paid would illustrate the consumer is loaded to the gills with tons of unneeded, unused and mostly broken shit and is lean cash or real productivity of things we need.  (fresh/clean water, food, and energy)

When I look in stores (I mean just about every one) 90% of what is there is just crap.

The horrific excesses WILL be deleted, but only after more than 5-10% of the people stop buying the crap no matter how much the price is reduced.

OldE

Wed, 01/22/2014 - 13:41 | 4355832 RKDS
RKDS's picture

Disposable computers?  You mean smartphones and tablets?

Wed, 01/22/2014 - 16:19 | 4356184 cbxer55
cbxer55's picture

Disposable computers are here. Bought a new desltop computer (Dell) in 2010. It died last year. The cost to fix it was higher than the cost to replace it with a much better newer desktop model (HP). This new one does not even have a tower, everything is incorporated into the screen. It's neat. And fast. Probably blow up three years from now, just like the last one. 

What used to be a high-priced valuable item, is now nothing more than junk. Like just about everything else.

Wed, 01/22/2014 - 14:32 | 4355919 Things that go bump
Things that go bump's picture

There is a proper English word for this phenomenon: It is contraction. Apparently, its too scary to use in this context. Deflation follows, though it is also apparently a scary word and has been displaced by disinflation. Words have power. The people who make up these terms know this and search for euphemistic terminology that is less emotionally loaded to keep people calm and distract their attention. Call the thing by it's name. Don't use the word they have given us. English is precise and so we know exactly what is being discussed without the trappings of a more palatable word. They surely aren't making up new ones for our benefit.  

Wed, 01/22/2014 - 14:41 | 4356044 Matt
Matt's picture

To put it simply, the house of cards is wobbling, but this particular house of cards operates in such a way, that if you stop adding more cards, it collapses on its own.

Wed, 01/22/2014 - 15:37 | 4356078 Things that go bump
Things that go bump's picture

Yes, but that is an analogy and not the noun defining the phenomenon we are discussing. It is not it's name. When you are presented with such a substandard, inelegant, imprecise word as degrowth when there is a better, more standard word to use, you might ask yourself why. Since I don't believe it is a problem of vocabulary, I can only believe it is an attempted manipulation. 

Wed, 01/22/2014 - 15:04 | 4356116 gwar5
gwar5's picture

We're in a Depression. 

 

Depression is 10% contraction, plus a few other criteria, but we meet them all over the last 5 years by Shadowstat data. Even Rickards makes no bones about calling it a Depression, says, "This is what a Depression feels like because we're in one right now, it's just that so far the FED has pulled out all the stops to keep it from feeling like a 1930's style Depression."

 

 

Wed, 01/22/2014 - 15:54 | 4356294 Things that go bump
Things that go bump's picture

Precisely, but I read somewhere that Roosevelt preferred the use of the word depression to the word panic because of its less grisly connotation. Our current bunch of TPTB find depression too grisly. Maybe they will name this calamity The Great Embarrassment?

Wed, 01/22/2014 - 16:01 | 4356349 Almost Solvent
Almost Solvent's picture

Exactly! All the "depressions" prior to the "great depression" were referred to as "the panic of 16/17/18/19__"

 

PANIC! DEPRESSION! GREEN SHOOTS!!!!!!!!!!!!!!!!!!!!!!!!!!!

Wed, 01/22/2014 - 16:33 | 4356503 Straw Dog
Straw Dog's picture
Nomina Rutrum Rutrum

Latin: Call a spade a spade

Wed, 01/22/2014 - 22:35 | 4357667 WmMcK
WmMcK's picture

I prefer to call it a fucking shovel.

Wed, 01/22/2014 - 12:34 | 4355582 L_Conquistador
L_Conquistador's picture

No sane person wants to deal with the hassle of going to the mall, seeing the local saggy-pants gang, etc., just to buy unnecessary high-priced crap.

Wed, 01/22/2014 - 12:49 | 4355613 CheapBastard
CheapBastard's picture

True dat. Malls are filled with teen rascals, some fairly belligerent....and no one wants to go out at night near a strip mall. You're simply an open target there. I was visting my brother in a west Houston 'nice area' and seems like there are several shootings every night even some in the so-called "good neighborhoods" like his as the man-boy-thugs infect surrounding areas. It's crazy reading about innocent people being gunned down during a robbery ... usually only for a few dollars.

It's widespread also ...  for example this shit:

Cops: Here are the four guys who killed Raphael Ward for his Marmot jacket

http://www.nydailynews.com/new-york/cops-guys-killed-boy-coat-article-1....

 

Poor kid.

What's happening to our nation?

Wed, 01/22/2014 - 13:12 | 4355730 pods
pods's picture

Just think of it like I Am Legend.  That is how I do it in most places.  Especially in the warmer months.  

pods

Wed, 01/22/2014 - 14:07 | 4355938 HardlyZero
HardlyZero's picture

Clockwork Orange or Soylent Green.

Two possible outcomes.

Wed, 01/22/2014 - 13:13 | 4355734 Kobe Beef
Kobe Beef's picture

Die-versity

Wed, 01/22/2014 - 13:50 | 4355865 NotApplicable
NotApplicable's picture

Personal responsibility has been thoroughly undermined by the nanny-state with it's classic incoherent divide and conquer tactics.

It doesn't take a genius to realize that there's little coherence to the idea that everybody is responsible for everybody else's behavior, but not their own.

Yet this is the "mature" version of society that we're presented with.

So, since politics is merely "fighting over control of the gun in which to direct society," these people have figured out how to eliminate the middle-man.

Wed, 01/22/2014 - 16:43 | 4356552 kchrisc
kchrisc's picture

I don't know anything about this "Rachel Ward" killing, but based on what we know about the gun and badge thugs and the so called "justice" system, can we even be certain that these guys might have done the deed?!

Now days it seems, the gun and badge thugs grab the first convenient person off the street, torture them and then take their "confession."

 

"What is one thing all police states have in common with each other? Confessions."

Wed, 01/22/2014 - 13:01 | 4355679 LMAOLORI
LMAOLORI's picture

 

 

Plus why risk being a victim of the knockout game or having to pay a lawyer to defend yourself if you defend yourself.

Wed, 01/22/2014 - 14:18 | 4355984 Son of Loki
Son of Loki's picture

It's widespread..happens in Phili, NYC and Austin almost every night now:

 

Woman Sucker Punched In Possible ‘Knockout Game’ Attack In Upscale Los Gatos

 

http://sanfrancisco.cbslocal.com/2014/01/08/woman-sucker-punched-in-atta...

Wed, 01/22/2014 - 14:44 | 4356054 Tim_
Tim_'s picture

"Police describe the suspect as an African-American adult in his early-to-mid 20s, standing 5’9” to 6’ tall with slender build and short brown hair."

Only White men are charged with "hate crimes."

Wed, 01/22/2014 - 16:21 | 4356437 Skateboarder
Skateboarder's picture

Los Gatos is upscale as fuck, where old and/or rich white people live. The browns are latinos and Indians - definitely not stupid enough to play stupid 'knock-out' games. Very few black people. This is pretty significant news for rich white people land. I bet everyone's scared shitless.

Wed, 01/22/2014 - 15:57 | 4356337 SquirrelButtDan
SquirrelButtDan's picture

A year or so ago there was a man who was shanked and killed for his wallet in a restroom of a dying mall in my city; it was not by a thug but by a crazy homeless man. I believe the mall is still clinging to life because of Sears and 2 gyms along with a mega church attached. I wonder what will happen to the mall when Sears goes under.

Wed, 01/22/2014 - 12:39 | 4355583 One And Only
One And Only's picture

Same Paul Krugman that won a Nobel for Economic Science and who got paid by Enron to write nice things about...Enron.

Listening to this piece of shit because he has a Nobel is like getting advised by Obama about peace because of his Nobel Peace Prize...same Obama that has killed thousands of women and children with drone strikes and usurped the following liberties from US citizens: privacy, freedom of speech, freedom of the press, unlawful search and seizure and attempting to usurp the right to bear arms. Maybe it's not too late to award the Nobel posthumously to Hitler, Mao, or Stalin.

Fuck. These. Niggers.

 

Wed, 01/22/2014 - 12:40 | 4355597 Calculus99
Calculus99's picture

I've said it here before, it aplies to the UK, maybe to the US as well.

 

Utilities
Travel/Gas
Food
Housing (mortgage or rent)

The power o the EXPONENTIAL (5% year on year) is starting to CATCH UP, therefore the majority of a pay packet goes on the aove 4 which of course means no spare money for anything that isn't a necessity.

So want a new pair of Jeans, get saving and you can have them for xmas, 2015!

Of course everyone seems to have forgotton the absolute power of the EXPONENTIAL which makes Albert Bartlett's famouns quote so correct -

"The greatest shortcoming of the human race is our inability to understand the exponential function."

 

Wed, 01/22/2014 - 12:49 | 4355628 Renfield
Renfield's picture

<<So want a new pair of Jeans, get saving and you can have them for xmas, 2015>>

Or, you can wait until some rich tourists visit and then buy their jeans for fairly cheap.

Remember the stories of how they did that in the old Soviet Union? As a teenager I wanted to go visit so I could sell my old jeans. (So I wasn't the deepest thinker as a kid.)

Maybe I'll still get to experience it, only from the other side.

Wed, 01/22/2014 - 14:53 | 4356086 gwar5
gwar5's picture

Undeveloped nations may spend 60% of their household budget on food, water. The social justice crowd is doing their best to make sure its coming to your town.

 

Wed, 01/22/2014 - 12:43 | 4355608 Dr. Engali
Dr. Engali's picture

Thanks to the internet,  and the continued downward spiral of wages, people can't afford to and don't want to go through the hassle of shopping at hig priced malls. If you go to the mall today the majority of people you will see are headed to the video game store, or old people looking to pass the time.

Wed, 01/22/2014 - 12:44 | 4355610 Flakmeister
Flakmeister's picture

And retail space per capita is still ~10X greater than the OECD average...

The rotting out has only just begun...

Wed, 01/22/2014 - 12:48 | 4355617 Tinky
Tinky's picture

This is an excellent analysis and overview. If you're attempting to enlighten those who don't yet understand what is happening to the economy, it's useful to pass along CHS's posts as he is often very good at explaining fundamentals in a digestible manner.

Wed, 01/22/2014 - 12:47 | 4355621 Magnum
Magnum's picture

There are two large shopping malls nearby, and they are always crowded. One is expanding significantly.

Do NOT follow this link or you will be banned from the site!