The big shoe.

The next Wilt Chamberlain shoe to drop.

Commercial Real Estate.

Quoting from the good people at Calculated Risk:

"Historically investment in non-residential structures lagged investment in residential by 5 to 8 quarters. The reasons are pretty clear - the commercial builders (for malls, offices, lodging, etc.) don't build until the residential is in place, and the commercial build cycles are usually longer than residential."

There are articles in the Wall Street Journal: "Mall Glut to Clog Market for Years and the New York Tims: A Squeeze on Retailers Leaves Holes in Malls."

(Just so you know, the Calculated Risk people are saying the CRE bubble doesn't compare the residential bubble.)

Here I'm going to fall back on that old bromide, all Real Estate is local.

We've had quite the building boom in Bend. It seemed like a lot of the construction workers just slid on over the CRE. But as I've said many times here -- if a project hasn't already broken ground by now, it's unlikely it will for the next few years.

There have already been a few high profile delays, and I suspect there are many more that are being quietly tabled.

So my concern again, in my business, is for the lost jobs.

Look around Bend and tell me if we have enough hotels. Enough stores. Enough restaurants. Enough office space.

From what I've been reading, the money for commercial development pretty much dried up at the beginning of this year; architect billings, which are a leading indicator, have cliff dived.

So taking the "5 to 8 quarters" time lag figure above, I figure that there will be few if any new projects in the works this time next year. We'll finish up what's being build and ....then....?

For one thing, the financial institutions still have some big blows to take, and some of them are already on the ropes. Combine CRE with all the time bomb Alt-Loans, and I think it's silly to call an end to the housing bubble. These things all inter-connect. Money dries up everywhere.

How does it affect Pegasus Books?

For one thing, it probably eases up on the upward pressure on rents. I don't think it's enough yet -- or enough in time to do me much good -- in actually lowering rents. Especially downtown.

It also means its less likely that the building across from me, or down the street, or even my own building, will be torn down and replaced, or even majorly renovated. I wasn't looking forward to looking at scaffolding for a couple of years.

And it also means that there is space available, if need be, if the worst happened and I had to move. I've been watching Greenwood, and there are still about 13 or 14 spots open. 3 or 4 of them might actually work for me. (Anyone want to loan me the money to buy the Boomtown space?) I'd probably be able to negotiate a decent lease; especially for the beginning year, which would be the roughest one.

But I'd really like to finish up my career where I'm at. I like downtown Bend. I'm comfortable. If I was 10 years younger, I might be willing to take a leap into a bigger spot, take a 5 year hit on earnings so that I could have better earnings for the last 15 years of my career.

But...I'd rather not do that.

So, I'm expecting and hoping to just renew, probably at a slight increase, probably do a bit of renovating, and stick it out.