Sunday, July 17, 2011

Thinking about the economy

When was the last time you saw a mall with every retail space occupied?

I was out and about yesterday, running various errands and picking up some odds and ends I needed, and it hit me -- every place I went, regardless of whether it was a traditional enclosed mall, an aging strip mall, or a relatively new shopping center (the 21st century's return to the strip mall concept), had vacant retail space.

Then I started wondering. . . just when was the last time I saw a shopping center that did not have at least one vacancy?

I don't know about you, but I'm thinking it was maybe the Carter administration for me. The 1970s. For almost as long as I can remember, the business model has been constant expansion, just keep building more and more retail outlets regardless of the size of the potential customer base. End result was that with rare exceptions, every town in the country has a retail zone that keeps shifting. A new mall or shopping center opens; an existing one loses customers and storefronts start going dark.

The bizarre part is that investors keep right on pouring money into this endless retail shuffle, and developers keep right on building. There's a huge surplus of empty space -- commercial offices, retail space, residential rentals -- in Atlanta right now, but what was the big story in the Business section of the paper? A developer's plans for rehabbing City Hall East (which began life as a Sears store, office tower, and warehouse). It's got something like a million square feet --the sucker is huge. It's probably the largest money pit I've seen in a long time. I do think adaptive re-use of the building is a neat idea, but when high rise condos that were built from scratch are having trouble finding buyers -- what are the odds that there's going to be high demand for condos in a renovated office building? The shopping plaza up the street from us hasn't been at full occupancy since we moved here 4 years ago, but nonetheless a developer bought  the apartment complex next door and plans to level it and build a "mixed use" development (retail and residential).

I happen to think mixed use is a great idea. It makes perfect sense to try to plan development so people can live close to where they work. However, just how viable is this as an economic model? What's the point of building more retail space when there's existing space standing empty? Ditto office space and condos.

There is no answer to my question, of course. Our entire economic way of life is predicated on constant expansion, constant growth. The idea of a healthy stability, a steady state that didn't involve continual new construction and abandonment of the old, is completely alien in modern society. You grow or you die -- there's nothing in between.


  1. I think the trend toward disposable construction plays into this directly. People build cheap buildings that look good for a little while and draw in businesses and customers. They make all their money in the early days of the development, and then when it starts to look crappy, they sell it off for cheap and move on to the next thing. The retailers move on to something more attractive.

    It seems to me that if we insisted on sustainable construction--buildings that would LAST--we'd see less of the sprawling expansion. I'm not too sure how we get there, though.

  2. You and anonyvox are onto something. Having worked for property managers and developers, it's pretty clear what the biggest driving factor is. Profit.

  3. Your post reminds me of, "The Story of Stuff"

  4. When was the last time you saw a mall with every retail space occupied?

    Hell, I'm a small town guy, and I can tell you that about 30 percent of the buildings here are vacant. Of that 30 percent about 50 percent of them are new buildings (five years old or less) that are yet to be occupied.

    Conclusion: I'm surrounded by fucking idiots.

  5. Here you can buy the old Walmart (they bought and tore down the old K Mart after it sat idle for ten years) property, and soon, the old Ford property.

    I'll bet the old properties sit empty for years, the buildings are in good shape but there is no need for such monsters here.

    A big Chinese lounge and restaurant burnt down recently, I sense that it's going to be an eyesore for some time, no economy here to justify rebuilding it.

    Oh well, that building was 50 years old, someone should buy the lots and build a nice whorehouse there.

  6. In our local mall the independent stores are disappearing and the spaces are quickly filled by more upscale stores - because the only people with money have a lot of money.

    The retail stores in our downtown keep moving out because the rents are too high. Then the spaces sit empty for years - what is the point of that?

  7. You grow or you die -- there's nothing in between.

    I don't believe that (unless you are a money monger), there is also just flowing along.


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