REAL ESTATE CRISIS

I JUST PUT THIS ARTICLE BECAUSE I THINK IS VERY GOOD !

BY MONEY CULTURE
Daniel Gross
The Other Real Estate Crisis
Are ghost malls going to haunt the economy?
Jan 9, 2008 Updated: 11:41 a.m. ET Jan 9, 2008


So far, America's real-estate agony has been confined largely to the vast residential sector. Commercial (office buildings) and retail (malls, strip malls, big boxes) real estate have held up rather well, even though those markets were propelled by the same factors that sent housing into orbit: easy credit, an abiding faith in perpetually rising asset values and misplaced optimism about economic expansion.
But when the economy slows and threatens to go into recession, it's usually bad for all classes of real estate. And despite President Bush's measured happy talk on the economy earlier this week, indicators are rising that American consumers are keeling over from exhaustion. Shoppers unwilling to shop spells trouble for the tenants of malls and strip malls—and for their owners and lenders. All of which suggests: get ready for the ghost mall
The retail real-estate market has already started to slow. In the third quarter of 2007, 7.4 percent of retail space nationwide was vacant, according to Reis A vacancy rate of 7.4 percent isn't tragic by any means. But it's the highest level since 2002, and it's up from 6.8 percent at the end of 2005. The third quarter of 2007 marked "the 10th consecutive quarter of flat or deteriorating retail occupancy at the national level," noted Sam Chandan, chief economist at Reis, in a recent report. Thanks to continuing growth in supply and flagging demand, there was about 140 million vacant square feet of retail space in the third quarter of 2007, up from 124.4 million vacant square feet at the end of 2006.
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Malls aren't turning into haunted houses just yet, but they may be on their way, thanks to the recent wholesale shuttering of national retail chains. (This column's long-standing guiding principle has been that when a naturally observed event happens three times in relatively short time-frame, it's a trend. Like, for example, egregious right-wing hacks getting richly undeserved columns in large-circulation print publications.)
First came CompUSA the electronics retailer that managed to make Carlos Slim Helu, one of the world's wealthiest man, a little less wealthy. Helu spent more than $800 million to buy the computer and electronics chain in 2000. But after years of losses, the Mexican billionaire threw in the towel on the brick-and-mortar business. Last month, CompUSAannounced it would shut down its remaining 103 stores. The week after Christmas, Macy's, whose 850 department stores frequently anchor malls, announced it would close nine large stores in Indiana, Texas, and Ohio.
The trend continued in the first week of January. Last week, Pacific Sunwear said it would close 154 stores of its urban clothing unit, demo, "as soon as is practical" and would also shutter its nine One Thousand Steps shops.