Re: is the retail bubble bursting?

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dualstow
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Re: is the retail bubble bursting?

Post by dualstow » Mon Apr 03, 2017 12:13 pm

Simonjester wrote: i have a nervous suspicion.. its based on my experience with the housing bubble bursting and some things i have read about and seen happening recently in retail.. Before the housing bubble burst i was working in an industry directly connected to housing, preceding the burst my employers started to cut staff and demand fewer workers get more work done with less hours.. my current employers in retail are now doing the exact same thing.. during the housing bubble burst, the retail property market didn't take as big a hit or need the bailouts.. they still have bundled mortgages.. they now compete with amazon for market share.. there are store closings happening in big anchor stores like sears and macys... the rent rates for small retailers at malls are tied to anchor stores being there.. there is potentially far more retail property available at far to expensive rent rates than is necessary in a world where on-line shopping is shrinking demand. and to top it all off the unfunded pension liabilities in places like CA and IL are heavily invested in retail REITS...

so .. if big stores cut locations in order to stay profitable and compete with on-line, and small stores can renegotiate their rent rates, due to the drop in traffic that loosing an anchor store causes. and malls and retail property cant pay their mortgages due to the drop in income.. then the bundled loans and commercial REITS may start to fail wiping out a large percentage of the pension investments in places where they are underfunded and on shaky ground to begin with... you would have a retail bubble burst that had potential to make the housing bubble burst look like a minor economic blip in comparison..
Clothing stores are having an especially hard time lately.
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Re: is the retail bubble bursting?

Post by Libertarian666 » Mon Apr 03, 2017 9:36 pm

Simonjester wrote:i have a nervous suspicion.. its based on my experience with the housing bubble bursting and some things i have read about and seen happening recently in retail.. Before the housing bubble burst i was working in an industry directly connected to housing, preceding the burst my employers started to cut staff and demand fewer workers get more work done with less hours.. my current employers in retail are now doing the exact same thing.. during the housing bubble burst, the retail property market didn't take as big a hit or need the bailouts.. they still have bundled mortgages.. they now compete with amazon for market share.. there are store closings happening in big anchor stores like sears and macys... the rent rates for small retailers at malls are tied to anchor stores being there.. there is potentially far more retail property available at far to expensive rent rates than is necessary in a world where on-line shopping is shrinking demand. and to top it all off the unfunded pension liabilities in places like CA and IL are heavily invested in retail REITS...

so .. if big stores cut locations in order to stay profitable and compete with on-line, and small stores can renegotiate their rent rates, due to the drop in traffic that loosing an anchor store causes. and malls and retail property cant pay their mortgages due to the drop in income.. then the bundled loans and commercial REITS may start to fail wiping out a large percentage of the pension investments in places where they are underfunded and on shaky ground to begin with... you would have a retail bubble burst that had potential to make the housing bubble burst look like a minor economic blip in comparison..
This wouldn't surprise me at all. Real estate is one area where people don't ever seem to learn from the past.
The other areas where people don't ever seem to learn from the past are, well, all other areas. :P
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Re: is the retail bubble bursting?

Post by WiseOne » Wed Apr 05, 2017 7:44 am

Simonjester wrote: if retail purchasing drops out then the retail property market seems like the next likely domino, i don't know how much debt there is in retail property or how much of it has been bundled and invested in blindly (i suspect a substantial amount), but i find the prospect of our shopping/service economy crashing to be a bit scary..

maybe i am in a crazy wear a sandwich-board on a street corner, screaming the end is nigh sort of mood but the clouds on the horizon do seem ominous..
On that topic...

https://www.nytimes.com/2017/04/04/busi ... auren.html

There's a lot of misinformation in the article as per usual (e.g. Trump Tower is nowhere near the Fifth Avenue shopping strip), but the increasing number of empty storefronts is very noticeable everywhere not just Fifth Avenue.

I'm sure online sales are responsible for a lot of this, but every time I've talked to a storeowner about why they're leaving they tell me it's because of rent increases. Knowing what's happened with residential property taxes over the past several years in NYC, I can take a guess about what might be driving that.
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Re: is the retail bubble bursting?

Post by dualstow » Sun Apr 09, 2017 1:13 pm

RIP Marcello Gandini
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Re: is the retail bubble bursting?

Post by dualstow » Sun Apr 23, 2017 10:04 am

More stores closing. (wsj paywall)
https://is.gd/LisWAd
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Re: is the retail bubble bursting?

Post by dualstow » Sun Apr 23, 2017 11:08 am

Simonjester wrote: this strikes me as an especially hard hitting bubble burst if the dominoes start to fall, retail falling out is just the first in a long chain of interconnected economic links, retail employees (the service economy) have even less income than they get now, which is less purchasing, and more stores closing, and more retail property going red on their debt... this could be truly ugly..
Do you think we should cut back on REITs?
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Re: is the retail bubble bursting?

Post by Tortoise » Sun Apr 23, 2017 6:59 pm

Simonjester wrote:
dualstow wrote:Do you think we should cut back on REITs?
well neither my pp or my vp have any REITS in them to begin with, and i haven't got the skills to be a professional speculator, but something is telling me that for someone who knew how to time it (getting in and then out) they could make a fortune betting against commercial real estate.... i wonder what Michael Burry* would have to say


*(movie "the big short")
I still don't fully understand the timing of all of this.

It seems like the economy never fully recovered to its pre-2008 recession level. Instead, we've gotten this weird bifurcation in the economy where high-end stuff (fancy/trendy restaurants and expensive retail) has boomed and lower-end stuff (budget restaurants and cheap retail) has kind of taken a hit.

So I guess I never really saw a "retail bubble" forming. Instead, I saw an economic bifurcation with overall wealth transfer from the poor and middle class to the wealthy. Plus, the residential real estate market in general seems to have heated up again. Commercial real estate may be hurting, but other financial sectors seem to be humming along quite well.

Just prior to the burst of the real estate bubble around 2007/2008, it all looked like absolute insanity to me. House prices were ridiculous, and I remember seeing article after article about it: million-dollar mobile homes in Malibu, etc. I knew it was an obvious bubble, and I knew it had to burst eventually.

These retail store closures seem more like a gradual economic trend driven by technology and changing consumer tastes, not necessarily the collapse of a financial bubble.

Is there some key thing I'm missing here?
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Re: is the retail bubble bursting?

Post by ochotona » Sun Apr 23, 2017 10:32 pm

I think also the free money since 2008 has driven lots of speculative commercial RE development and store placement, which were never going to be successful in the Amazon and Wal-Mart Digital age, or maybe not ever. People get incentives and bonuses for flipping dirt, originating loans, building big boxes, but not for creating value for the actual customers. I think it was all about getting paid with free money for activities.
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Re: is the retail bubble bursting?

Post by whatchamacallit » Mon Apr 24, 2017 4:06 am

Simonjester wrote: if i had to guess i would say the retail property bubble formed at the same time as the housing bubble, it just never had the visibility or the crash/correction that the housing bubble had when it popped. the gradual economic trend toward on-line shopping directly impacts the commercial real estate market. the question is will we find uses for the commercial property to replace whats there now, and do so fast enough to keep paying the rent/debt and allow a slow correction? or will there be a dramatic decline? and there is also the question of how much commercial property debt has been bundled/tranched and buried in high stakes investor gobbledygook and sold to the unsuspecting as "good debt" when its real value may be quite different.. the last question i really have no answer to, other than i wouldn't be surprised if it was quite a bit
Something I was thinking since land values started getting crazy again.

Stores will start closing just due to ROI being too low with a sunk cost analysis.

If the land is worth much more now but sales have not increased. It will encourage sale of land.

Doesn't necessarily mean a bubble but good reason to close a store.
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Re: is the retail bubble bursting?

Post by dualstow » Mon Apr 24, 2017 7:35 am

When the malls are gone, and self-driving cars reduce parking lots, what're we going to do with all this land? Grow arugula?
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Re: is the retail bubble bursting?

Post by Pointedstick » Mon Apr 24, 2017 9:19 am

dualstow wrote:When the malls are gone, and self-driving cars reduce parking lots, what're we going to do with all this land? Grow arugula?
https://duckduckgo.com/?q=detroit+farms ... &ia=images
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Re: is the retail bubble bursting?

Post by dualstow » Mon Apr 24, 2017 9:26 am

Cool. I was just reading a WSJ article last week about "micro-lofts" and other tiny apartments in Detroit. (And Pittsburgh and elsewhere).
I'm really rooting for Detroit.
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Re: is the retail bubble bursting?

Post by barrett » Mon Apr 24, 2017 12:00 pm

dualstow wrote: I'm really rooting for Detroit.
I am as well but it seems from the link that PS posted that they are moving back to an agrarian society. I'd much rather see that land being cultivated than just covered over with pavement, but is this really a good thing in the grand scheme of things?
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Re: is the retail bubble bursting?

Post by dualstow » Mon Apr 24, 2017 12:03 pm

A valid point, B, but it's temporary. No point in building too fast or prematurely.
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Re: is the retail bubble bursting?

Post by Pointedstick » Mon Apr 24, 2017 2:28 pm

I think reverting to a local agrarian existence is actually ideal for most of Detroit's sprawling area. Living locally means you can't get overextended with outside money, credit, or goods very easily. It's a healthier, more resilient life. Frankly a huge amount of American suburbia is probably headed in that direction over the next 40 years. Prepare now by switching your gas appliances to electric, putting a central composting toilet in your basement, solar panels on your roof, a battery bank in your garage, and a wood stove with a cooktop in your living room.
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Re: is the retail bubble bursting?

Post by dualstow » Mon Apr 24, 2017 2:33 pm

In Detropia on netflix, they talked about trying to consolidate the city, actually moving people out of long-held homes, to the center I assume. This was to help keep bus routes practical, etc.
I have no idea if they actually did it.
From PS's image link, looks like they've been busy with other endeavors. :)
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Re: is the retail bubble bursting?

Post by barrett » Sun May 20, 2018 10:32 am

Simonjester wrote: i have a nervous suspicion.. its based on my experience with the housing bubble bursting and some things i have read about and seen happening recently in retail.. Before the housing bubble burst i was working in an industry directly connected to housing, preceding the burst my employers started to cut staff and demand fewer workers get more work done with less hours.. my current employers in retail are now doing the exact same thing.. during the housing bubble burst, the retail property market didn't take as big a hit or need the bailouts.. they still have bundled mortgages.. they now compete with amazon for market share.. there are store closings happening in big anchor stores like sears and macys... the rent rates for small retailers at malls are tied to anchor stores being there.. there is potentially far more retail property available at far to expensive rent rates than is necessary in a world where on-line shopping is shrinking demand. and to top it all off the unfunded pension liabilities in places like CA and IL are heavily invested in retail REITS...

so .. if big stores cut locations in order to stay profitable and compete with on-line, and small stores can renegotiate their rent rates, due to the drop in traffic that loosing an anchor store causes. and malls and retail property cant pay their mortgages due to the drop in income.. then the bundled loans and commercial REITS may start to fail wiping out a large percentage of the pension investments in places where they are underfunded and on shaky ground to begin with... you would have a retail bubble burst that had potential to make the housing bubble burst look like a minor economic blip in comparison..
Any updated thoughts on this, simon? Have the staffing cuts continued since you first posted this?
Simonjester wrote: I was working for the R US corporation at the time I wrote that and (if memory serves) it was well before they announced the bankruptcy that ultimately led to their closing.. I read the writing on the wall.. and started job hunting based on my previous experience in the building supply industry, and strong "hunch" that the way the company was being run was an indication that the end was nigh, I was ready to move on shortly after the bankruptcy deceleration and before they announced they were closing their doors. O0

The general economy is looking up a bit since then, and I am no longer with a big store retail company so I don’t have the inside view any more, but I suspect that the trend I saw in my op is still going strong in that sector, the 1990s retail model is obsolete and the corporate retail environment is frozen in cement and unable to change its thinking or practices.. my current prediction is that the trend will continue and the bubble will burst.. but a healthy general economy may slow down the time it takes before the reckoning comes..
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Re: is the retail bubble bursting?

Post by Kriegsspiel » Sun May 20, 2018 10:38 am

A recent article highlighted how the costs of online advertising were working to reduce the price advantage of online shopping vs bricks and mortar.
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Re: is the retail bubble bursting?

Post by barrett » Sun May 20, 2018 11:21 am

Kriegsspiel wrote:
Sun May 20, 2018 10:38 am
A recent article highlighted how the costs of online advertising were working to reduce the price advantage of online shopping vs bricks and mortar.
Might you have a link for that article?

I don't watch much television but with the NBA playoffs going full tilt I have been tuning in more. It's striking how much of the advertising is about being able to order stuff on your phone "without leaving the couch." Equal importance is attached to, say, not losing one's hair and not leaving the couch. Now if we could only not have to pick up the damn smart phone, that would be progress!
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Re: is the retail bubble bursting?

Post by Kriegsspiel » Sun May 20, 2018 3:53 pm

barrett wrote:
Sun May 20, 2018 11:21 am
Kriegsspiel wrote:
Sun May 20, 2018 10:38 am
A recent article highlighted how the costs of online advertising were working to reduce the price advantage of online shopping vs bricks and mortar.
Might you have a link for that article?
I'll see if I can find it.
I don't watch much television but with the NBA playoffs going full tilt I have been tuning in more. It's striking how much of the advertising is about being able to order stuff on your phone "without leaving the couch." Equal importance is attached to, say, not losing one's hair and not leaving the couch. Now if we could only not have to pick up the damn smart phone, that would be progress!
I don't get why everything needs to be done on the phone. If you're at home on the couch, laptops are the best. Followed by pads, then phones. And if you're out waiting in line or on your car while you're driving, like a douche, you can probably wait till you get home to apply for your mortgage or order those socks on Amazon or whatever.
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Re: is the retail bubble bursting?

Post by Kriegsspiel » Sun May 20, 2018 3:59 pm

I almost gave up looking through the marginalrevolution pages too soon, it was further down on the last page I was on, but heroically I managed to scroll down one more. I am a ballin motherfucker.

https://marginalrevolution.com/marginal ... merce.html
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Re: is the retail bubble bursting?

Post by Mountaineer » Sun May 20, 2018 5:34 pm

Kriegsspiel wrote:
Sun May 20, 2018 3:59 pm
I almost gave up looking through the marginalrevolution pages too soon, it was further down on the last page I was on, but heroically I managed to scroll down one more. I am a ballin motherfucker.

https://marginalrevolution.com/marginal ... merce.html

Krieg, is this you by another forum name at the above link? Sounds familiar, sort of like Krieg speak. R E S P E C T man, R E S P E C T. ;D ;D ;D ;D ;D

urethra Franklin
May 2, 2018 at 9:51 pm
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Cowen's being contrarian on bricks and mortar. Clearly they are mostly dying. As for George Mason's scandal? Plus ca spare change, man. Private universities are mostly country clubs, but with government loans bankrolling the poorer new members - it's an AMAZING scam, and my hat is off to the usufructs who've embedded themselves into the money stream. System don't work? Don't tell that to Tyler. He's got it wired. In the modern university, the professors are the senior golf pros, and the administration creams off the big profits. Again, it's an AMAZING scam. Mason's only mistake is to take right wing, rather than left wing, money. That's a tactical mistake in the moral universe of the university. They'll figure it out and they'll find a new Dean with a good scramble for new money - look for that leadership change next year. And they probably need a new bag man.


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DNA has its own language (code), and language requires intelligence. There is no known mechanism by which matter can give birth to information, let alone language. It is unreasonable to believe the world could have happened by chance.
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Re: is the retail bubble bursting?

Post by barrett » Sun May 20, 2018 6:20 pm

Kriegsspiel wrote:
Sun May 20, 2018 3:59 pm
I almost gave up looking through the marginalrevolution pages too soon, it was further down on the last page I was on, but heroically I managed to scroll down one more. I am a ballin motherfucker.

https://marginalrevolution.com/marginal ... merce.html
A ballin' mofo, indeed. I am actually surprised that e-commerce is not already a higher percentage of overall retail. This is from the article:

"The march of e-commerce has certainly looked inexorable. As a percentage of total retail sales, it matched its all-time high of 9.1 percent in the fourth quarter of 2017, and gained share on a year-over-year basis at its fastest rate ever. At current growth rates e-commerce will be 10 percent of retail sales in 2018, and 15 percent by the middle of next decade."
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Re: is the retail bubble bursting?

Post by Kriegsspiel » Sun May 20, 2018 9:35 pm

MangoMan wrote:
Sun May 20, 2018 4:32 pm
Kriegsspiel wrote:
Sun May 20, 2018 3:59 pm
I am a ballin motherfucker.
And a modest one, too. :D
It's a miracle I'm as modest as I am, considering my handsomeness level.
Mountaineer wrote:
Sun May 20, 2018 5:34 pm
Krieg, is this you by another forum name at the above link? Sounds familiar, sort of like Krieg speak. R E S P E C T man, R E S P E C T. ;D ;D ;D ;D ;D

urethra Franklin
May 2, 2018 at 9:51 pm
53
Cowen's being contrarian on bricks and mortar. Clearly they are mostly dying. As for George Mason's scandal? Plus ca spare change, man. Private universities are mostly country clubs, but with government loans bankrolling the poorer new members - it's an AMAZING scam, and my hat is off to the usufructs who've embedded themselves into the money stream. System don't work? Don't tell that to Tyler. He's got it wired. In the modern university, the professors are the senior golf pros, and the administration creams off the big profits. Again, it's an AMAZING scam. Mason's only mistake is to take right wing, rather than left wing, money. That's a tactical mistake in the moral universe of the university. They'll figure it out and they'll find a new Dean with a good scramble for new money - look for that leadership change next year. And they probably need a new bag man.


Respond
That's not me. But Uretha Franklin... O0
barrett wrote:
Sun May 20, 2018 6:20 pm
A ballin' mofo, indeed. I am actually surprised that e-commerce is not already a higher percentage of overall retail. This is from the article:

"The march of e-commerce has certainly looked inexorable. As a percentage of total retail sales, it matched its all-time high of 9.1 percent in the fourth quarter of 2017, and gained share on a year-over-year basis at its fastest rate ever. At current growth rates e-commerce will be 10 percent of retail sales in 2018, and 15 percent by the middle of next decade."
Cars, furniture, and clothes? I dunno. 10% seems pretty low, but that might explain it.
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Re: is the retail bubble bursting?

Post by clacy » Mon May 21, 2018 10:09 pm

The REIT's and commercial real estate investors I work with have been getting out of retail for the last 12-18 months. The writing is on the wall and outside of some companies that swoop in and get some steals for pennies on the dollar (likely from banks at that point), there won't be a lot of appetite for retail RE investment for the foreseeable future.

I think at least 20-30% of the existing retail shopping locations will go out of business in the next 4-5 years.
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