SHOPPING MALLS AND PARADIGM SHIFTS IN ECONOMICS………
First as a Norte Damn many time historian visitor and student – and catholic – may I say to all my tribe who treasure history faith and priceless humanity – how sad we are for our PARISIAN families and communities inside and outside our French CEO SPACE community. WE ARE ALL CATHOLICS TODAY WE ARE ALL WITH YOU AT NORTE DAMN TODAY.
OLD IS WORTH WHAT?
Hell. When you reach my age you remember you actually recall working on Norte Damn in the 11th Century.
You recall rebuilding the grand lady after fires and being sacked along with Paris and more than once. Paris gets on with it…you’ll see.
I remember when horse shoe folks slow to adopt failed to see the big bucks were now in tire repair not horse shoe lifestyles that collapses.
I recall loading and unloading film to get film developed right up until the digital shifts that Eastman Kodak went from 84% market share to 11% market share in say sixty months as management failed to see the most potent force in all economics PARADIGM SHIFT.
I recall when Sam Walton who I was honored to meet when alive – figured out as a CPA who to use new computer power – to compress shopper ease and price – to present brand name quality to Wal Mart lower prices – and – I say and – you no longer ( for the first time when the paradigm shifted ) had to drive park and carry to multiple of locations to get your pharms, your food, your toys for the kids, your coffee pot, your garden tools or any tools and your outdoor stuff and a battery charger and a 30 odd 6 to shoot deer with. Centuries of the local merchant you knew and they knew you went by the road side like an old horse shoe.
By the 1980’s in the shortest time frame 72% of all consumers shopped at Wal Mart for the TIME they saved the experience they had back when grandma welcomed you to wal mart – when along came Amazon. I’m that old.
SHOPPING MALLS THE 7 TRILLION DOLLAR UNANSWERED ECONOMIC QUESTION 2019:
My brother ( my baby smarter funnier brother ) publishes for some 40 years – plus – INSTITUTIONAL REAL ESTATE NEWS. Every REIT controlling the wealth of the world, reads IRE like a bible. My Daughter works at IRE with her George Town Degree and two Cornell Post Graduate Degrees – Jennifer is SMART.
Neither Jeff Dohrmann or Jennifer Dohrmann read Dad’s blog – they are way to busy trying to figuer out the MALL SPACE. The wild card in REIT investing and the trillions the capital markets have invested in those REITS. Read my brothers IRE for trends and best possible betting in that space as one more source – the oldest most trusted. What a great acquisition for Warren Buffet and his side kick. Always the best one’s are never on any market don’t you think?
SO we are 2019. Do you think the shopping malls I knew with peak foot traffic in 2018 – sliding now – have futures? They failed to adapt to the paradigm shifts of AI and digital marketing. These older institutions require we leave home – agggg – we pay more – we park and walk miles – we wonder around and window shop and impulse buy plus what we came to get all taking more time even if just dropping off an IPAD for a repair. We HATE ALL THAT in 2019. Don’t we? Yet we once there enjoy the experience of trying on a dress or a suit eating a cookie and people watching and hey shopping. Touching feeling smelling it big experience difference than a click.
Is the experience of riding one horse worth not having an 85 horse power model T Ford instead warm and dry in the rain – toastie in the snow – passing all those riding horses like we just did in Amish Town Ohio.
Retailers in 2019 so far – SO FAR have shut down 5,994 stores – opening a total as a market of only 2,641 this year. Foot traffic has been dropping off all malls in recent months. I don’t count that fall off as real yet as the winter snows over 70% of America where sun belt states had 28 below zero – and one does not bundle the kids up in Sun Belt States OR OHIO and say – hey honey is 28 below outside and snowing lets rush out to the MALL. No and hell no.
As Spring roars now lets see how foot traffic comes in for the forward quarter.
Enter the NEW AI ECONOMY. The AI economy is not smart enough yet to BE human. The AI can not FEEL the market from decades to the future. The AI had limited perspective training by its programers who are not economists or investment bankers anyway. Yet they code how 440 trillion in capital will flow. The AI investing in REIT’s that control the bulk of MALL SPACE are nervous and near panic. Why?
ENTER CHAIRMAN POWELL OF THE FEDERAL RESERVE BOARD:
So in comes Powell Janet Yellin’s pick to execute her vision as the worst Fed Chairperson in 100 years as repeatedly reported accurately on this blog site – and he does. Powell keeps raising interest rates way too fast way too soon risking a system melt down. How?
Well lets take 7 trillion in Shopping Mall Real Estate. This is not the total of shopping mall real estate – in fact no where near that – it is the crises properties.
Now consider the crises properties reside on a floating island of bank DEBT. The Debt we call bank regardless if the ban is a bank bank or investment bank as they are all furry blurring now anyway. Debt Debt.
So the Malls in serious down bubble missing the DIGITAL SHOPPING PARADIGM SHIFT ENTIRELY – still – failing to remain current and relevant ( the key C suite master skill ) remaining CURRENT – CURRENCY in the NEW AGE OF SUPER CHANGE AND AI. What is YOUR PROCESS TO get CURRENT and remain there? You might explore CEO SPACE INTERNATIONAL May 18th in Dallas as the Press Ranked # 1 program to do just that – the # 1 business conference measured by third party press ten years in a row.
So now the economics a fifth grader can appreciate:
- Buying patterns slip shift and move – so you discount everything and can’t get your margin back.
- You refinance the real estate at near zero interest on five year renewing loans.
- 7 Trillion come due this year and in 2020.
- Your new rate is 400% and I believe autistic Powell will raise interest again so 500% higher than last loan.
- The Malls revenues can not support ( declining rapidly in 2019 ) 500% higher commercial loan cost.
Powell and Yellin before Powell have now put 7 trillion of default potential where the keys to failing malls return to Banks who have zero expertise how to manage such assets now failing. The bankruptcy and debt default cascade in commercial space will spill over as a wave of economic contagion to all supplier and outlet source and support to other commercial defaulting. Keep your eye on this needle.
Billions have been invested to rethink whey we wish to leave our comfy home pay the criminal cartel hgh gas price park and walk to get into the mall – walk all around the mall and then walk way back to our cars versus – say – Click – look up and go back to our NETFLIX. Folks the paradigm has shifted and like Kodan Mall owners failed to see the light. In the billions to put amusement parks in malls – connect convention hotels to malls – put in food varieties never seen before and health everything green everything as into 2019 with shocking decline in foot traffic all year – closing double the stores opening – losing at a 50% level in months in 2019 – the economics are very dicey for the investment capital in this space. But even that space has now changed.
The Patience is removed by AI. AI has no mercy. AI seeks to make the highest profits in the shortest time period brutally punishing under performance in TIME FRAMES NEVER KNOWN BEFORE and to reward winners in performance in time frames never seen before – SEE GE or SEE DISNEY.
Mall traffic was up in 2018. Mall Traffic was up by new Mall ( way behind the power curve ) first generation AI that kept them at bargains – but hey can you sell at a LOSS and make that UP on Volume with AI. As AI saw the lack pf profits this Holiday it punished Mall owners and their investor pools.
IT was massive and is on going.
2017 was a historic record for mall and store closures. More than 8000 retail stores closed in 2017.
In 2019 the expert AI trackers agree – as they project an all time history record of over 12,000 store closings or almost 50% down bubble in Mall economics in what 24 months folks. REALLY? That is a PARADIGM SHIFT – don’t throw cigarettes out your window at the horse shoe buy po lease.
Mall operators facing an never ending TSUNAMI in vacancies we all see as SAD now when we visit malls – typically now to high tail in and out for a specific task only – no browsing as in old era shopping – we click for that. Further the mall owners are forced to offer deals that lower their cash flow as unseen in any modern data.
Less Foot Traffic.
Massive Store closing and mall vacancies.
Changed shopping habits with less browsing and impulse buying – buyers compare value on line before they get in line.
Massive decline in revenue without any let up for a full decade.
Massive default back to bank.
Massive refinance coming up this year and next against economics where the loan cost is adjusted to risk where the refinancing is now often 500% to 800% more interest than was paid at near zero interest loans five years ago when FREE MONEY was available from the FED easing program.
Consider the pressure of the economic vice:
- Lower traffic and buyers – crashing in 2019
- Lower profits with sales to keep the buyers you have – ending profits at all
- More ads to attract buyers but that cost is no longer returning at all
- Soaring interest to your refinance
- Massive vacancies
- No new profit path to replace a model crushed by pyradigm shifting in the market place.
All of which is taking place at SUPER CHANGE speeds to fast for humans to even adapt as we have seen with Kodak GE and Mall Owners. Telsa changes everything for automotive as you are seeing today. Paradigm shift. Musk owns space that Nasa once owned. Paradigm shift – NASA joined them – how can the MALLS join them?
That is the question.
Related to MALL SPACE – versus retail over all and on line and in botique high touch hi pesonal high value retail ( all doing great like say the Dollar Store Levis and Five Below are opening stores but it is so not enough to off set the closures from the giants like Victoria Secret the GAP and FREDS to name a few losers to PARADIGM SHIFTING.
We consult to trapped economic leadership to present invisible options that when made visible often show ways forward.
We are short on this space.
Monitor Mall Owners Simon, Brookfield, Taubman Macerich, Preit CBL Washington Prime all are expected to report earnings in coming days and weeks watch them like a hawk.
Watch AI capital reaction to those reports and remember like a magic crystal ball your ahead of things. We may hit an all time stock market record but some pull back is going to AI follow and this is only one reason why.
Mall Space is the wild wild west on making any bets at all until Tombstone deals with its gangs and cleans up the paradigm shift ….about sums it up on Monday.
Finally we send prayers to Paris as today part of every French citizen burned with Norte Damn a soul fire for us all. Lets remember our history is priceless and we must preserve and rebuilt our own no matter what.
Berny Dohrmann – ON WHAT IS REALLY GOING ON OUT THERE – IT IS NOT A TWEET FOLKS – ITS ALL HERE !!