- The general economic malaise.
- The great price dis-connect between sellers and buyers.
- The deteriorating conditions of capital markets.
However no one has a crystal ball!
We all know that markets are cyclical in nature.However I believe that this market is much different from past ones because of:
A. Globalization and the loss of industrial and service jobs in the US.
B. The high cost of gasoline and probably high cost of all heating fuels for this coming winter.
C. The value decline of the US Dollar.
D. The cost of two, long term highly expensive wars, being funded on "borrowed money" and not on present taxes.
E. The every growing global security issues ranging from Iran, Pakistan, Georgia and now Russia.
F. The global financial and housing market crisis.
Some financial and governmental leaders say that this is the worst global financial crisis since the 1930's. All of these factors are now impacting the US retail markets and will for some time.
Daily, we read of more store and sit-down restaurants closings. All this indicates a rather lean outlook for the retail Christmas season. For the mega and regional malls I predict many more vacancies before the end of the year. For the larger shopping centers in prime locations near the malls I see the same trend.
Malls and all shopping centers are going to be hit hard with the anticipated cost of heating this winter which will be passed thru to the tenants. Ouch. Low sales volumne and increasing store costs are not a good combination.
Many shopping center sellers today are offering their properties at 2001+ prices, increased by a factor 20 to 25%. Needless to say they are not selling like hot cakes.
In my opinion, many of these centers were purchased on speculation, and not on long time income anticipation. Investor-Buyers today are NOT buying because they are of the opinion the retail property inventory is greatly overpriced. The buyer-seller disconnect.
Who will blink first? That's the $64 dollar question.
I'm of the opinion that pressure is going to come from the banks and financial institutions holding the present paper on many centers as the banks will be forced, by the feds and state banking regulators, to value these centers on present market values and will have to adjust their individual " loan to value ratios." Sounds like the 1980's.
The owners of many centers that overpaid are going to be hit hard as now many are under water with inventory worth less than the current debt obligation.
Now is the time for very cool heads and patience. Many investors are between a hard place and a rock: keep capital in banks at low interest rates or play the high risk stock market? Many want to invest in real estate here in the US but some will be forced off shore.
For those with patience I see some great property opportunities coming down the pike.
More to follow
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