Service of Retail: A Bellwether of the Economy’s Health, Impact of Shifts in Purchasing Habits or What?
April 28th, 2016
Categories: Economy, Real Estate, Retail, Work
On a recent weekday we walked down First Avenue from 70th to 53rd Street in Manhattan and were alarmed by the number of empty spaces where stores, restaurants, nail salons and other business once thrived in a neighborhood swarming with people. The worst was an entire block with rental signs in all the street level windows.
The Mt. Kisco Daily Voice reported last week that the Poughkeepsie Kmart branch is one of 78 to close around the country in May. I’ve driven by it a few times a month for years. The times I dropped in I found that the supposed value priced store offered cheap fashion and home fashion with no flair and commodities at far from discount prices which, in part, may account for this news.
On to another retail scene. “Upscale Shopping Centers Nudge Out Down-Market Malls: Some retailers are closing stores in weaker-performing locations to focus on Web sales and more luxury spots,” was a Wall Street Journal headline for Suzanne Kapner’s article. She wrote “Once-solid regional ‘B’ malls that thrived for years are losing shoppers and tenants to the ‘A’ malls—those with sales per square foot in excess of $500, according to Green Street Advisors.
“The research firm estimates that about 44% of total U.S. mall value, which is based on sales, size and quality among other measures, resides with the top 100 properties, out of about 1,000 malls.” Kapner continued: “Mall owners disagree about whether the Internet is their main problem. They point to demographic changes that redirected population and income growth away from malls built years ago, along with a real estate glut that has left the U.S. with 24 square feet of retail space per person, compared with 15 for Canada, 10 for Australia and 5 for the U.K., according to the International Council of Shopping Centers.”
A few days later, also in The Wall Street Journal, Kapner wrote “Glut Plagues Department Stores,” where she reported that hundreds will close “to regain the productivity they had a decade ago.” Green Street Advisors was again her source. Some 800 are expected to close representing “a fifth of all anchor space in U.S. malls.”
The developers will figure out what to do with these properties and customers will find other places to buy what they need but what about all the employees–how will they make a living?
I wonder if these retail signals representing mom and pop enterprises to major brands reflect shifts in purchasing habits or a canary in the economic coalmine–or both? Politicians and their followers looking for easy answers and quick fixes will blame increased minimum wage laws and the greater cost of health insurance for employees under Obamacare. Others will fault the closings on the massive shift of disposable income from the middle class to the extremely rich, which has occurred over the last 35 years. What do you think?