Great Recession Widens an Already Huge Retail Hole

The retail blight that has laid waste to malls and shopping plazas across America has claimed yet another high-value victim near our Colorado neighborhood: The Great Indoors, a remodeling and redecorating megastore in Broomfield’s Flatiron Marketplace. When the Sears-owned emporium goes darks in mid-December, it will leave 58 people jobless and a 155,000-square-foot building empty. It could also sink the entire Flatiron Marketplace, since the closure will more than double the facility’s vacancy rate to 67%.  That number had hovered near 30% for the last couple of years after Office Depot, Linens N Things and Nordstrom Rack departed in quick succession, leaving the shopping center’s manager with the daunting task of finding new tenants even as retail vacancies continue to soar locally and nationally. 

The huge new hole in the retail landscape comes at a bad time for nearby Flatiron Crossing Mall, a 1.5 million-square-foot, $220 million shopping center that itself is reeling from the recent closures of Borders Books and Ultimate Electronics. Other stores that have closed there in recent years include Abercrombie & Fitch, which mistakenly thought its snob-appeal pricing would survive the Great Recession; Fossil, McDonald’s, Godiva Chocolates, Sharper Image and numerous smaller retailers. The exodus actually began about eight years ago when one of Flatiron Crossing’s anchor tenants, Lord & Taylor, became a casualty of a 32-store closing by the parent company. The two-story building that had housed Lord & Taylor, an upscale department store, sat empty for six years, a gangrenous appendage of a mall that has been in survival mode ever since.

Will City Survive Loss?

An even bigger casualty of these closings could be Broomfield, which depends heavily on sales taxes to fill its coffers. Years ago, the City of Broomfield split off from Boulder County and re-incorporated as a county in order to pursue commercial growth aggressively. Regardless of whether this strategy backfires on them, sending Broomfield into bankruptcy, the grim retail picture is certain to necessitate severe budget cutbacks. Towns have gone bankrupt before, and if it were to happen to Broomfield, it wouldn’t be the first time that a an overly ambitious municipal growth scheme put taxpayers on the hook for more than they’d bargained for.

We can’t speak for other regions of the country that may be experiencing similarly hard times on the retail front. In fact, our observations have downplayed the extent of the local problem, which has seriously affected or shuttered several malls in the area. We can’t imagine who will eventually fill the huge spaces being left by The Great Indoors, Borders, CompUSA and too many others. Even more worrisome is the possibility that the few big-box store chains that remain will go out of business, creating more vacancies than could be filled, even, in a decade of prosperity. It took much longer than that to bring U.S. consumerism to a full-boil, and even if it should return, the big-box concept may be dead, replaced by online shopping.

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  • Mercurious October 27, 2011, 7:27 am

    I just returned from a week of leaf peeping in New England. It wasn’t just the fall colors that were eye-opening.

    You get a real sense of how far down the arc we’ve regressed when you see the row upon row of once-great factories repurposed for condos–for whom, I don’t know. Entire heavy industries gone, taking thousands of jobs with them. And what do we have in its place?

    It seems to me Americans no longer believe we can get rich doing each others’ laundry. With all the environmental regs that have to be met these days, that’s a rather passe business. Now, we seem to believe that what America needs is to fill up every vacant space with nail salons, tee shirt shops and restaurants. I know we’re a well-manicured, casually dressed and overfed population, but my God: how many of these businesses do we need?

    It is very sad to hear the stories of the political and industrial leaders who did great things when we were a young and hungry nation. We cannibalize our history, cobble together a recreation of it to sell to the tourists and make sure we have the biggest American flag decal on our bumper that we can find.

    It’s amazing that in only 50 years, we have sold just about everything worthwhile to the highest bidder foreign or domestic and are now content to pat ourselves on the back and talk about the glory days.With no change in sight, we are more and more distanced from that glory each day.

  • Chris T. October 26, 2011, 5:57 pm

    You can’t poh-poh Mike’s notion a priori, it IS ridiculous.

    Certainly the “fari” price argument is misplaced, as pointed out above by fallingman and others.

    BUT; being misplaced, there is a proper place to locate the disdain:

    at those that cause the sums to be available for these “obscene” pay-outs.
    The viewers, fans, voters (yes, see my comments about subsidies above), corporations, the legislature, really current society.

    And yes, singling out athletes, and leaving aside the others mentioned later on by Mark Uzick is indeed unfair.
    But the conclusion of that is not to say, oh if not actors/directors/etc, then not athletes, but rather, if athletes, then also those.

    To use on name: Simon Cowell.
    Name one high paid athlete who is LESS deserving than this buffoon?
    But, who made him rich?
    And there you have it.

    Liberace hit the nail on the head:
    He basically admitted that he was not one of the greats, butlook at what that says about his fans.

    All of this does come back to cultural relativism, which is disdainful, but better stop here, or people will get insuted….

  • Mark Uzick October 26, 2011, 8:38 am

    >>>Mike October 26, 2011 at 3:52 am

    “Professional sports, which I admit I love watching, has become an obscenity. What I mean by that is that the amount of money that athletes are paid. It is impossible to justify paying anyone who is playing a “game” the ridiculous amounts of money that we do.”<<<

    I'm not a sports fan, but I'll defend their high pay:

    Professional athletes are entertainers; the most talented and striving out of a vast pool of hopefuls, making their value to teams and media companies worth more than they are paid. This is every bit as true for the ultimate source of their income: Their fans.

    I wonder if you complain as loudly about the income of writers, singers, actors, directors, talk show hosts and composers who've made it to the top?

    If you don't think they're worth it, then don't give them your time and money; or is this just about envy?

  • mava October 26, 2011, 7:20 am

    Mike,

    Here is a way to think of it:

    How did you determine that those athletes do not make a world a better place?

    You can only tell us about 1 seventh-billion part of the whole truth, you do realize, since you can’t speak for others.

    Disclaimer: I have no interest in any sport watching whatsoever.

  • Bc October 26, 2011, 6:35 am

    You’ll know we are nearing the bottom when those big boxes are converted to girl’s volley ball venues. That’s what we do with them here in CA.

  • Mike October 26, 2011, 3:52 am

    Professional sports, which I admit I love watching, has become an obscenity. What I mean by that is that the amount of money that athletes are paid. It is impossible to justify paying anyone who is playing a “game” the ridiculous amounts of money that we do.

    Nevertheless, we continue to watch our favorite sports, don’t we. But, I cannot understand how any athlete can be worth “millions” per year for simply playing a “game,” because, in the end, that’s all they’re doing.

    Professional sports, aside from providing us with some temporary diversion and excitement, really does nothing to make the world a better place to live, despite what those who really promote it would like us to believe.

    • fallingman October 26, 2011, 5:20 pm

      I would respectfully suggest that you’re buying into the Aristotelian / Thomian (Thomas Aquinas) notion that there is a “fair price” for things that can be objectively determined. (In Thomas’s world, it’s a sin to charge more than that.) Your disgust is a reflection of this ancient philosophy expressing itself afresh in today’s world.

      In contrast, I would say that what something is “worth” is determined by what someone is willing to pay for it, by definition. It’s an entirely subjective thing. Gasoline is worth nothing to you if you don’t have a car or other gas-using machinery, but if there’s a gas shortage and grandma has to get to the hospital and there’s only one source for gas in the area, that same gas is worth quite a bit, now, isn’t it? The person that owns the gas that’s in such high demand might want something more for it than say $3.50 a gallon. He might want $10. Guided by a bit of flawed philosophical thinking, we would accuse him of “price gouging.” And yet, he exchanged a thing of great value to you…the ability to get Gram to the hospital for a few extra pieces of green paper. Seems like a screaming bargain to me.

      But let’s take it down a notch to something that has no utility whatsoever. How much is a Mickey Mantle rookie baseball card worth? It’s just a little piece of cardboard with a picture on it. To a baseball afficianado, a collector, a relative of Mr. Mantle, or even a casual baseball fan, it’s worth somewhere between something and a whole lot. (My mother threw mine out when we moved from NY in 1963!!!! A true tragedy, even though…let me be clear…I hate the Yankees.) To an Indonesian rice farmer or a Dutch house painter or a Bornean aborigine, it’s worth nothing.

      So, what is the card’s “fair price?” Would $1,000,000 be an “obscene” amount? It’s just cardboard. Could we just throw it out and not lose a thing? Hmmmm.

      It’s no different with ballplayers. If nobody cared to watch the sports in question, their services would be worth exactly nothing. But they do, so they are worth one helluva lot

      In a free market, no “justification” is required for earning what you can, as long as you do it honestly.

      Your disdain might be better directed at bankers. They didn’t earn their money. They stole it.

      Just some things to consider.

      I too enjoy watching sports…baseball and golf mostly. (I had a knee-buckling curveball in my day, but no heater worth the name.) And sports are certainly a modern day opiate of the people. Bread and circuses.

    • Robert October 26, 2011, 7:02 pm

      “It is impossible to justify paying anyone who is playing a “game” the ridiculous amounts of money that we do.”

      BAH- fairness has nothing to do with what the athletes earn- their earnings are based on their personal skill, competitiveness, and marketability. A person worth more than his peers because he produces more, should be entitled by the immutable law of markets to explore where his maximum compensation level lies….

      We all do it. Don’t tell me you’ve never left a job to go to another company where they offered you the same work (or less) for more money… happens every day in every field of endeavor.

      The only pricing a fan has to concern themselves with are ticket prices. When ticket prices run above the willingness of the market to bear, then people will stop paying them, then revenues will decline, and the owners will put salary pressure on the athletes, and the athletes will push back on the owners, and the free market will eventually rule the day…

      The NBA lockout is a marvelous free market case study.

  • Chris T. October 26, 2011, 12:18 am

    “The bottom of this pit may still be a long way down.”

    certainly seems that way.
    The owners of these properties certainly appear to be able to hold their breath for much longer, but not forever.
    As the above Office Depot to Circuit City ex. shows, that property has been vacant for four years, only now providing (assumedly) a little cash flow.
    But at the very least property taxes, insurance costs, bare-bones utilities were or had to be paid all that time.

    An NY/NJ/CT CRrealtor told me that sq.ft. to buy prices were at perhaps $100-110 at the peak, but even now, routinely one is quoted $80-85 sq.ft. That is only about %15-20 down, hardly enough.
    This is not for retail, but manuf.warehousing spaces, of which there is lots around, and hardly ever in ready-to-be used shape.

    Perhaps all anecdotal to me, but if roughly the true state of affairs, there is lots of room down.

    Carol, sports:

    Indeed to the panem-et-circenses thought, the comment above is more for the within system arguement, meaning the sheeple you refer to are totally unreceptive to your point, can’t or won’t see it, but the simple math of misleading every school year’s athletes is inescapable even for them.

    When I first heard of the practice in the South mainly, of keeping boys back a school year, so they would be bigger for their high school football years, I couldn’t believe that to be true, but it is.
    What a ridiculous mindset.

    Then again, those are the kind of townes where you will always find the Stars and Stripes in every room of the churches, and the military is routinely prayed-for…

  • mava October 25, 2011, 11:28 pm

    Well, the residential real estate is going in a good direction, – at least not too far from where I am, a place called Irvine, California (a snobtown without any fantasy if you ask me), the housing prices have finally reached rental parity, according to a local blog.

    I’d say that parity will keep moving down, as people can afford less and less, and then finally when interest rates go up, but it is still a good news.

    As for CRE, most of those folks don’t own the estate anyway, they just mortgage it long, then lend it short. Seems to me, that this kind of business plan is going to make a bite mark on their hind end sooner or later.

    Normal people who own the estate outright, seem to be doing just fine in this environment.

    • bobby October 29, 2011, 2:49 pm

      ah, Disneyland! the OC is a cesspool of overspending, overborrowing, and consumerism. Yeah, listen to the CAR, they will tell you what they want you to hear. Rentals may be on par with prices but still nowhere nea producing a positive cash flow for an investor with 25% down. Cali real estate prices, especially in the OC have a long way to drop from here.

  • Robert October 25, 2011, 11:07 pm

    Commerical real estate is interesting….

    The sub prime bubble definitely popped- it went from “party-time” to “hangover time” almost overnight.

    The commercial delveraging is moving much more slowly- which seems more ominous to me (like how a freight train crawling toward your car at 2 mph carries a lot more energy and potential destruction than a crotch-rocket barrelling toward your car at 100 mph)

    The bottom of this pit may still be a long way down.

  • Jacques Redou October 25, 2011, 10:00 pm

    A community without a Mall
    Is like a fish without a bicycle.

    Carol, you are right about sports potatos,
    however, People who have nothingincommon
    can talkaboutsports.

  • Mark October 25, 2011, 9:36 pm

    I live inside the Beltway.

    Bwahahahahaha.

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  • Andrea October 25, 2011, 6:36 pm

    But looking on the bright side….if you’ve ever
    shopped the Great Indoors you know that it
    sold to the snob crowd and was the very essence of
    puffed-up prices. Case in point: for a brief time we
    were (or felt we were) flush with cash and since we were renovating a house, we found ourselves in the Great Indoors buying a classy post-style mailbox for, as I recall, $379.

    Two things happened: came across the identical
    mailbox at a local building supply store for somewhere
    around $100. And after a few years the door fell
    off our classy mailbox, irreparably damaging it.

    No matter what else happens, a return to the VSL
    of which John Jay speaks is almost inevitable; and
    a very good thing for us incredibly indulged, soft
    Americans.

  • Chris T. October 25, 2011, 5:48 pm

    John Jay,

    one wonders if the odious Steinbrenner clan would have been able to extract the 1/12 billion, plus public park land from NYC/NYS today.
    Does show what great timing George had.
    But then, in this sports obsessed place, maybe he could have gotten his way even so.

    At least the NY Islanders got shot down by the Nassau County voters.
    Hope in your neck of the woods, the majority gives the NFL its middle-finger.
    You want to play, then pay your own way!

    Plus, with the changing demographic of LA, american football is less and less important vs. international football.

    Was very hartening to hear the NBA give up even more of its season, could do without the whole thing.

    What is so bad about sports?
    Not the majors actually, but the deception the major leagues play on school and college kids:

    Every year thousands upon thousands (really hundreds of thousands) of schoolchildern, and college “students” waste their future by dedicating it to a sport / sports in which they will NEVER have a career.
    How many get drafted or otherwise employed by MLB, NBA, NFL?
    perhaps 0.1%.

    And the few that actually use it as a springboard to a better education / non-sports career?
    “Coach, I have to study for my xxx exam on Monday, I can’t come to practice, the game this week”
    NOT!”

    • Carol October 25, 2011, 6:50 pm

      What is so bad about sports?

      I believe whats so bad about sports is that it is a mind numbing distraction that keeps all the good little sheeple on their couches ruining their health swilling their beer and eating potato chips while they play out their fantasies of grandeur. Am I being too harsh? I don’t think so.

      This country is so obsessed with sports because the TPTB want it that way. Not only is sports a grand distractor but it also builds up a great “Us vs Them” mentality and patriotic feelings (we’re better than you) amongst the sheeple that plays well into the whole divide and conquer as well as the war games TPTB like to play.

    • John Jay October 25, 2011, 7:15 pm

      Chris T,
      The sports worship out here in the Los Angeles area may finally be cooling off. The Dodgers seem to be slashing season ticket prices, since Dodger Stadium has been half empty this season. Mr and Mrs McCourt, the owners, have received a lot of bad publicity over their lavish lifestyles. Add to that the ongoing recession and the thug presence, people are just staying away.
      The two dueling proposed football stadium plans both swear no public funds involved.We’ll see. Once in a while I go to a Little League game and watch for free. The only time I go to a pro sports event is when I get free tickets.

  • Tec-trac October 25, 2011, 5:09 pm

    Maybe all this vacant real estate will revert back tp agricultural use!

    Wouldn’t that be a grand irony?

  • Sutton October 25, 2011, 3:56 pm

    Maybe Obama/Ben will capitalize an American style GUM department store filled with pleasant municipal union employees.

  • John Jay October 25, 2011, 2:46 pm

    As more and more Americans are forced into a VSL (Very Simple Lifestyle) competition in retail and restaurant will intensify. The Government tells us food and energy inflation don’t matter. But that inflation does matter to the increasing number of Americans living paycheck to paycheck. It means less diposable income to eat out and pay $50 for $5 worth of food in a restaurant. It means less money for thoughtless shopping sprees to the mall.
    Then as all that trickles down, it means less rent money to the CRE sector, and less sales tax to local governments. Mava is right about mal-investment.
    Here in LA the big news is the plan to build a mega stadium complex downtown to lure an NFL franchise back here. It should generate lots of hot dog vendor jobs for one day every other week for three months a year. Think of a football stadium as a huge shopping mall/restaurant where people who like to everpay for everything feel right at home twelve days a year. (including pre-season etc.) I think we shall see more and more evidence of the VSL taking hold in America in the future. And there will be fallout from that new trend.

  • RO October 25, 2011, 1:56 pm

    Rick, after reading today’s commentary, this website might be of interest

    http://www.deadmalls.com/

  • Chris T. October 25, 2011, 5:10 am

    Every morning I pass a local old-highway strip mall where a big-box stand alone was rebuilt about 4 years ago (used to be an Office Depot).

    After a while, it sported a Circuit City logo, which went up about 1-2 weeks before the chain went under.
    Store never opened.

    It’s been empty ever since O.D. od’ed (sorry), just recently a big “Halloween n’ Things” or some such store sign went up.
    Can’t see that this is more than a seasonal rent, who wants Halloween all year long.

    On the same plot, K-Mart is gone, Pathmark too (part of the A&P bankruptcy). What’s left is low rent:
    dry-cleaner, discount booze, an IHOP.

    You can tell its a low-income area from the above, but go the Short Hills Mall (NJ’s 5th avenue mall) and there are gaps too.

    OTOH: saw an old lady caning her way accross the “Casino Credit” office at the AC Showboat (mea culpa for being in the place,but music is the excuse, J.A.).

    So, our folks are still not done with borrowing to waste, let alone blowing what paltry income/savings they may have (and it is the low-rent crowd, with the feeder busses leaving from the most decrepit places in NJ: Jersey City, Trenton, Irvington, Plainfield to name some standouts in greater NYC).
    Somehow things haven’t sunken in that deep, despite all the signs.

  • mava October 25, 2011, 3:23 am

    Can you say “mal – in – vest – ment”? FED is extremely efficient in separating small time fools and their money. Too bad it doesn’t practice the same religion with big time fools.