There is an article in Slate, about "Ghost Malls", which I've reprinted in full below my commments.

The commercial bubble in Bend is still expanding, probably because much of it was planned in the midst of the housing bubble. Lots and lots of retail yet to open in Bend over the next couple of years. But, to me, this means it is even more dangerous in the long run.

I wish some intrepid reporter would investigate the per capita retail footage, but whatever that footage is currently, it is inexorably growing bigger.

This is second-hand, but from what I'm hearing, leases for retail in downtown Bend are still rising rapidly. What's even more interesting, leases in less desirable areas of Bend, along 3rd St. or Greenwood, for instance, are also rising. In fact, the proportions are narrowing, which - I really hate to say this, but foot traffic is hard to argue with -- it makes downtown Bend a relative bargain. I'll be watching the space for the Wild Women to see how long before it's filled -- a month or less wouldn't surprise me, 2 or 3 months would be interesting, and more than that would be alarming. If I had to bet, I but heavy odds on the first option.

The Tea shop has opened next to the bakery on Bond, and there is a new dress shop going in where Bandy's was, and so on. I think we've got a long way to go before things slow down. And yet....that's no reason not to sound an alarm now. The same way the housing bubble could be ignored when it was in full swing, so can the retail bubble. But if the fundamental underlying factors are whacked, then eventually it will catch up to us.

I can almost hear people saying, but Bend is different. We're a local hub, and so on.

Yeah, we're different. Just like with the housing bubble, we're worse.

It's probably going to take years to play out. If we're lucky, the national economy as a whole will rebound before the commercial bubble pops. It's always going to be more difficult for stores in Bend to succeed. Not because of the high leases, because healthy stores can factor that in. No, the overall business climate can't absorb too much of a slowdown. There are alot of businesses that are simple miscalculations, but then those businesses always exist. But you can only slice the dollar so many ways before you start feeling it.

I've got a feeling that my theory that MY STORE does well, when other stores are doing badly, is about to be put to the test. The weather has really slammed the foot traffic equation. I wonder what the newly opened stores are thinking. The next six months are going to be interesting, for sure.


.moneybox: Commentary about business and finance.
Ghost MallsIs retail real estate about to crash?
By Daniel Gross
Posted Wednesday, Jan. 9, 2008, at 10:26 AM ET
Illustration by Mark Alan Stamaty. Click image to expand.

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 when the slowing economy is led by pooped-out consumers, it's usually disastrous 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 Inc. 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 tenth consecutive quarter of flat or deteriorating retail occupancy at the national level," noted Sam Chandan, chief economist at Reis Inc., 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 a 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 men, 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, CompUSA announced 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.

Like Pacific Sunwear, Talbots had sought to expand its market beyond its core consumer (in Talbot's case, women over the age of 35) by introducing new retailing concepts, including Talbots Mens and Talbots Kids. But last week, Talbot's, having concluded that the kids (and the men) aren't all right, announced that it would shutter its 66 Talbots Kids and 12 Talbots Mens stores sooner rather than later.

Taken together, these closings amount to a tiny fraction of the nation's retail space. But they're indicative of a larger retrenchment under way, one that is likely to continue. America's largest chains—from Wal-Mart to Home Depot, from Starbucks to the Gap—are all in slow-growth mode in the oversaturated domestic markets. Circuit City and Sears are just two national retailers who may find it necessary to shrink their national footprints in 2008. And with consumer spending having slowed, it's much more difficult for landlords to fill newly vacated space.

Since many of America's largest mall owners are well-capitalized firms that built or acquired their properties decades ago, we're unlikely to see the carnage that has befallen publicly held home-builders. But signs of stress are emerging. Centro Properties, an Australian real estate firm that has made huge acquisitions of American malls at inflated prices in recent years, is now holding a clearance sale on its own properties.