Stories
Slash Boxes
Comments

SoylentNews is people

posted by martyb on Tuesday April 25 2017, @04:27PM   Printer-friendly
from the the-need-for-pants dept.

In the 1980's people wrote about malls as cultural centers, as temples to shopping. Now, they're dying.

Many observers are speculating about the growing trend of so-called dead malls: once-flourishing, large retail spaces that now have a high vacancy rate, low numbers of pedestrian traffic, or the lack of an "anchor" store (typically a department chain). Is it because of economic recession, or stagnant middle-class wages and growing income inequality? Or has the death of these malls been hastened by the rapid growth of online shopping?

It's difficult to say, but the dead mall phenomenon is becoming a cultural item of interest -- for retail historians, urban explorers and documentarians alike. We may read about dead malls in The New York Times or The Atlantic, but film footage can say much more than words.

Is Amazon to blame?


Original Submission

 
This discussion has been archived. No new comments can be posted.
Display Options Threshold/Breakthrough Mark All as Read Mark All as Unread
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
  • (Score: 3, Interesting) by Techwolf on Tuesday April 25 2017, @05:57PM (10 children)

    by Techwolf (87) on Tuesday April 25 2017, @05:57PM (#499439)

    I knew a couple folks that had store in a mall. The lease prices was insane, like $10 per FOOT of space per month. Once the recession hit and a few stores moved out, the malls was less of an attraction and mall traffic went down. The greedy owners did not relise this until it was too late to reduce prices to attract more stores.

    Starting Score:    1  point
    Moderation   +1  
       Interesting=1, Total=1
    Extra 'Interesting' Modifier   0  
    Karma-Bonus Modifier   +1  

    Total Score:   3  
  • (Score: 3, Insightful) by VLM on Tuesday April 25 2017, @07:05PM (8 children)

    by VLM (445) Subscriber Badge on Tuesday April 25 2017, @07:05PM (#499494)

    An empty spot is just a temporary blemish, but if you reduce rent you can run that thru a simple equation if the new price of the real estate drops below some cutoff on the mortgage, the bank forecloses the next day due to "risk" ratios. Even if the mortgage is being paid, even if the owners are running a profit.

    You owe $2B on a piece of property "worth" $3B the bank is chill, a few empty sublets here and there whatever.

    As soon as you drop rents and the property is now worth $1B and headed down, the bank is gonna foreclose.

    It makes financial sense for the bank to foreclose because they have $2B on the loan and if the likely sales price is $1B and dropping every day, every day their eventual bankruptcy loss will be higher.

    There's a lot of empty CRE out there, not just malls, because mark to market would be a bankruptcy for the owner at the foreclosure sale.

    • (Score: 2) by sjames on Tuesday April 25 2017, @07:31PM (7 children)

      by sjames (2882) on Tuesday April 25 2017, @07:31PM (#499508) Journal

      Actually, it doesn't make a lot of sense. The bank gets NOTHING unless they can sell the place off. And if they're already having trouble getting tenants in, there aren't a lot of people who will cough up the billion dollars they want. More likely it will become a weed ridden eyesore worth even less and the bank will never see a penny.

      OTOH, if they allowed for a temporary reduction in rent, the place might remain a going concern end even pay off the whole loan eventually.

      So much for efficiently allocating resources.

      • (Score: 2) by VLM on Tuesday April 25 2017, @08:05PM (4 children)

        by VLM (445) Subscriber Badge on Tuesday April 25 2017, @08:05PM (#499524)

        Without early foreclosure, its like 3B, 1B, 500M, 100M finally the landlord can't make a payment and the bank gets 100M back on their 2B loan

        With early forclosure its like 3B, 1B whoopsie the bank forecloses and gets 1B back on their 2B loan.

        Its a difference of some 900M bucks in this made up example.

        In real world another curious issue is rate of decline vs payment of revenue stream, if the property is dropping in value by 10M/month but the mortgage is 15M/month then yeah the balance sheet screams bankruptcy but they are technically paying it off quicker than its depreciating and in theory foreclosing later would result in lower loss than foreclosing soon in that weird scenario.

        • (Score: 2) by Grishnakh on Tuesday April 25 2017, @08:32PM (2 children)

          by Grishnakh (2831) on Tuesday April 25 2017, @08:32PM (#499545)

          Yeah, but you're not answering the question: where are they going to find someone to take out a $1B mortgage on this place, who isn't going to also fail like the current mortgage holder?

          Basically, if you're a bank lending to people for real estate, you're basically letting them manage property that you technically own (sorta). If you foreclose, that means you no longer believe they'll manage it profitably (they're going to default on your loan), so you want to find someone else who will manage it more profitably (they'll pay more over their loan's lifetime than the current mortgagees). But if the property is losing value anyway, that's just not going to happen. The current mortgagees can only do so much; they're subject to market conditions just like anyone else, so the only reason you'd want to give up on them is because they're incompetent.

          I'm not saying the banks are really making the best decision here, or that they're not thinking the way you describe, but it sure seems stupid to me. If someone buys a Pontiac Aztek at full price, and then wants to pay less because they had to take a lower-paying job, does it make sense to repossess it, knowing that you'll probably not find anyone willing to pay anywhere remotely near the outstanding balance for it because it's such an eye-sore?

          • (Score: 2) by migz on Tuesday April 25 2017, @08:40PM

            by migz (1807) on Tuesday April 25 2017, @08:40PM (#499556)

            That's easy. It's called QE. Uncle Sam will loan them the money, and the taxpayers will pay for it. Win! Win! Win!

          • (Score: 2) by VLM on Tuesday April 25 2017, @09:00PM

            by VLM (445) Subscriber Badge on Tuesday April 25 2017, @09:00PM (#499572)

            so the only reason you'd want to give up on them is because they're incompetent.

            Yeah that was kinda my last paragraph.

            Note that real estate is interchangeable cog as is property managers, and about half the property managers out there are below the median in performance, so maybe we only hear about the bad half where the bank pulls the trigger and not the other half.

            Also if the property can be turned around, its not even a median / on average thing, if the bank can find a prop mgr who can sweet talk them into pulling the trigger so they can take over...

        • (Score: 2) by sjames on Tuesday April 25 2017, @08:46PM

          by sjames (2882) on Tuesday April 25 2017, @08:46PM (#499565) Journal

          The bank doesn't get 1B back because they have to sell the thing first. But since they foreclosed, it is no longer a going concern, so it devalues even faster. By the time they get around to selling, it isn't a slightly out of date mall with a 50% occupancy, it's a ghost building featuring a rat condo. That is, if they don't neglect it to the point that it has actual negative value (since it will cost to tear the thing down).

          OTOH, if they just deal with it when the rent is lowered to get shops in, so long as the mortgage is still being paid, it might just make it as the economy improves. If not, it still defaults to the rat condo, but at least they got more payments out of it.

      • (Score: 2) by migz on Tuesday April 25 2017, @08:16PM (1 child)

        by migz (1807) on Tuesday April 25 2017, @08:16PM (#499530)

        Yup. All these malls are bust, and the banks are stopping them from being used productively because then they would have to admit they were too greedy in the first place, and take the losses. If the banks did that then they would be bust (see sub-prime loans). This garbage is possible because of the government, the Fedral reserve, and fractional reserve banking.

        Now what is worse, is that people pension money has been ploughed into these things. So... they can either go pop, and be put to productive use. Or the powers that be can put their fingers in their ears and go la-la-la and pretend that there is nothing wrong. Cue ZIRP and bailouts.

        Meanwhile the "real" economy is tanking, and this fascist wall street + fed + government illusion is starting to break down. The cure is to raise interest rates, until nobody wants to take fed money and then do away with it. If any of the banks go bang along the way, tough. They screwed it up and they need to go out of business, so that the real world can get back into control. Finally the government needs to bugger off and get rid of all the red-tape that makes it simpler for companies to make stuff overseas (and keep their profits there). Also lower taxes. Everybody's taxes. Taxes are just burning money. The government is colossally incompetent at doing everything (except perhaps colossal incompetence), they should not be entrusted with peoples money. People are much better placed to spend their own money, then government.

        • (Score: 1) by khallow on Tuesday April 25 2017, @10:09PM

          by khallow (3766) Subscriber Badge on Tuesday April 25 2017, @10:09PM (#499629) Journal

          This garbage is possible because of the government, the Fedral reserve, and fractional reserve banking.

          This is an accounting gimmick which generates imaginary reserve. It would work even in the situation where fractional reserve (however you choose to count that) somehow doesn't happen. The government and its agencies are merely enabling the necessary changes in accounting rules.

  • (Score: 2) by Kilo110 on Tuesday April 25 2017, @11:39PM

    by Kilo110 (2853) Subscriber Badge on Tuesday April 25 2017, @11:39PM (#499688)

    I sometimes have to work with leases and I can confirm this.

    This was back in 2012 ish. So not even that long ago. It was with a major multinational that owned many malls. The guys that wrote the lease thought they were still in the 80s. They handed us a 80 page legal tome. It was completely one sided and the rent was insanely high. Way higher than 10 per sqft with annual rent increases of 5% and they were entitled to a portion of our top line revenue after a certain sales point.

    We laughed at it and politely told the leasing agent to fuck himself.