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Macro Economics
We Built too Much, Way too Much...

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By Goofyhoofy
July 21, 2009

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So I was going to the once-a-month flea market on Saturday, and drove past a pawn shop that had a guy in a cartoon character costume waving a big "25% OFF EVERYTHING" sign at traffic. Well, I've been in there before, prices are already good, and 25% off "good" is "very good", so I stopped in, and ended up buying a ladder for about $28. I priced it at Home Depot later that night: $94.

But I was in the wrong car to bring a ladder home, so I went back today in my van and picked it up. Now pawnshops are not usually located in the classiest section of town, and this one is no different. And as I was on my way, I remembered the trip on Saturday thinking "Wow, a lot of empty storefronts." So I did a slightly more thorough survey this time, and came away even more surprised.

For starters, the pawnshop (I'm sorry, the "Jewelry and Loan Store") is sort of at the end of the "used car" miracle mile, probably 20 dealers, mostly small guys peppered in and around the three or four "name brand" dealers who are located there. Except oops, the GM guy is gone, and so are maybe 10 of the 20 little guys. They've thoughtfully left their buildings and signs up, things like "No Credit? No Problem!" and such, but there are no cars anywhere. Much asphalt. Not much metal.

Then I began to notice the other things. There's a closed Midas Muffler shop. A place that surely used to be a fast food emporium of some brand, probably a Hardee's or something. A dark K-Mart which had been refitted as a huge body shop repair plaza, now that's gone, too. At least a dozen small businesses - from tailor shops to motorcycle gear, a vacuum cleaner place and a travel agency. Empty. A Chinese restaurant. Abandoned. And of course, an ugly hulk where a Circuit City used to be.

The upscale mall in town here now has a ghetto wing. There's a dollar store, except it's not even a Dollar Store, it's some guy selling crap for a dollar. There are two clothing stores that wouldn't have gotten into the cheapo strip mall a couple years ago, and there are yet two more nail places where women can get color applied to their fingertips. They're usually empty. One storefront is a big empty room, where people give massages (legit) in the back. My wife goes there once in a while, but it's usually deserted, too. This mall is a Simon property, FWIW, and they're obviously scrambling for anything.

We built too much, wayyy too much, and it will be years before we can soak it all up. That augurs ill for construction (although there will be some retrofit business, surely), and that augurs ill for bringing down unemployment anytime soon.

The Times had an interesting piece a couple days ago. The US has led in "retail square footage per capita" for some time. Recently it was 20 sq.ft. per person. Canada is next closest, with 13. Australia has 6.5. The highest in Europe? Sweden, with 3.
http://www.nytimes.com/2009/06/14/magazine/14FOB-Consumed-t.html?scp=1&sq=dark%20big%20boxes%20kmart&st=cse

The story is mostly about "big box" re-use ("The Repurpose-Driven Life"), but it documents, at least in that genre, what the real estate people call "overhang", and what the rest of us remember from our college days as "hangover."

But surprisingly, along the way, were two new developments: one, a brand new building set to become a day-care center (it's a couple thousand square feet, I'd guess) and another, where a CVS used to stand, has become a 2-store "strip mall". The first shop is already in: a Radio Shack, and empty walls await the next eager tenant. It might be a long wait.

It might be a long wait for all of us. I wouldn't want to be a commercial landlord about now.