beware the second wave.

[jonathankaplan]

I was going to talk about something more interesting and cheerier, but this seems more timely. The inefficiency in the commercial real estate market is about to dump a lot more pressure on the solvency of banks, and maybe even the system (again). Everywhere I've been lately, there are increasingly more empty storefronts, empty buildings, a great

Comments

[tomscud]

Definitely seeing empty storefronts in Chicago. There's an entire building maybe four blocks from the El and on a major street, that used to have a typical Barnes and Noble and another similarly sized store in it, that has been standing completely empty since Christmas. The other egregious cases I can think of are out in the burbs more, but they're definitely visible.

[adb_jaeger]

Ditto that.... we just moved into Chicago from Geneva (far western burb), and while there's definitely some empty stores in town, Geneva was beginning to look like a ghost town.

Couldn't close on that house sale fast enough.......

[tomscud]

Also, I thought the second wave was going to be credit card debt. Is that still looming, or has it somehow been averted?

[adb_jaeger]

Still looming, but CRE is going to be a killer.

As is all the actual residential real estate banks are still carrying, but not being honest about. Between all the government mandated foreclosure abatements and the general unwillingness of banks to actually foreclose (because then they actually have to eat a loss), there's a TON more distressed property than is being admitted.

(Disclosure... I am mostly short Mr. Market right here, except for positions in GDX and PPH, so I am talking my book).

[kenshi]

Agreed. CRE dwarfs consumer credit default risk.

[jonathankaplan]

Not averted. Merely subsumed. When the poop hits the fan, those numbers won't be as significant as other failings, I think.

I used to live in Chicago, I assume you are talking about State St. (above). That is a shame, State St. is a great street.

Thanks!

[rcfox]

Maguire Properties is giving back six complexes to banks locally. Most of the commercial properties have tenants, but rents are down significantly.

What I have seen is that development at both the old Tustin and El Toro Marine Corps Bases has ceased. No new homes, no more commercial, no more retail. There's no demand for new structures today.

[jonathankaplan]

...cause the internet efficiencies are making some structures obsolete, there are too many anyway, and the banks don't want to finance any more to boot.

In the long run scheme of things, this is just an adjustment of the economy, but for many people, the adjustment hurts worse than a super-wedgie. (Blame the last imagery on my oldest grandson, who just learned about wedgies.)

Thanks!

[freelikebeer]

The Jersey burbs of Philly are basically flat. The shopping-plex that opened on the site of the old Garden State Park racetrack is bustling. The Cherry Hill Mall looks to be handling its upgrade well. I see some commercial real estate signs, but we haven't had a lot of development, either.

That said, the large, mostly government funded corporation that I work for has been trimming personnel all over the place. This probably reflects a reallocation of those dollars to companies in other districts.

[jonathankaplan]

The Cherry Hill mall was there (and needed upgrading) when I was a kid. Glad to see it still exists. Sad to see Garden State Park disappear though.

Thanks for your response!

[gunga_galunga]

Lots of empty store fronts in Denver and "will build to suit" signs. Several projects near me look like they've been put on hold. This guy has a ton of properties for sale/lease along the Broadway corridor. It will be interesting to see if he survives.

[jonathankaplan]

I read those links and I agree. I hope he does survive, he's got chutzpah in spades.

Thanks!