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Every time we read or hear about
the supposed economic recovery, or about how the Fed has raised its
“growth” target for the next quarter, we are reminded that the
nation’s retail sector — like its real estate sector —
remains an absolute, unmitigated, Katie-bar-the-door disaster. Yesterday it
got even worse when Borders Group declared bankruptcy. This is bad news for
those who love books, of course, since the firm’s megastores, which
average about 25,000 square feet in size, are a great place to browse. But it
is even worse news for mall operators who count Borders as a major
tenant. In the Boulder, Colorado, area where we live, there were three
giant Borders stores until a few years ago, when one in the heart of the
city’s shopping district closed. The space has remained vacant ever
since, a drain on the owner — but also a huge dead zone on a street
where retailers are struggling to survive.
The bankruptcy will force the
closing of a second megastore located at 29th Street Mall. That
will be quite a blow to the developer, Maserich,
since they’ve been dealing with a few
other large vacancies and the closure of several large restaurants. The
Borders store there occupies two big floors on the mall’s most heavily
trafficked corner, and we cannot imagine another tenant big enough to fill
the space. Even if such a tenant existed, they would probably be able to find
cheaper space at a soon-to-be-vacant building nearby that currently houses
Ultimate Electronics, a big-box chain store that also declared
bankruptcy this month.
Post-Christmas Exodus
The third Borders store in the
immediate area is located in the Flatiron Mall in Broomfield, about a mile
from our home and eight miles from Boulder. Although there has been no
announcement yet concerning whether it will close, there is no reason to
think this won’t happen eventually. While companies often emerge from
bankruptcy with renewed health and vigor, it’s hard to see this
happening to Borders, which, like Barnes & Noble and every other purveyor
of books, is fighting for its life in competition with Amazon and digital
publishers. Flatiron Mall has so far survived the loss of some big tenants,
including Lord & Taylor, Hold Everything, Restoration Hardware and, most
recently, Abercrombie. However, a post-Christmas exodus created even more
holes, including three food-court drop-outs: McDonald’s, Richie’s
Neighborhood Pizza and Panda. But Borders’ space is going to be the
toughest new hole to fill if it goes dark, since the store occupies a
two-story building in an outdoor section of the mall called “The
Village” that has already lost two-thirds of its original
tenants.
The Scary Thing Is…
What’s scariest about all
this is that the local economy is probably among the strongest in the U.S. Home
prices in my suburban neighborhood are firm – only slightly off
peak-levels achieved two years ago. If the malls in this area are
losing tenants in droves, then it must surely be worse in many regions of the
country. And that’s why we are always dumbfounded when we see Rupert
Murdoch’s recovery story du jour on the front page of the Wall
Street Journal. Whom does he think he’s fooling? Certainly
not the news anchors. In case you haven’t noticed, they continue to
refer to the economy as “troubled” even as The Guvvamint’s Ministry of Economic Propaganda
continues to pump out “recovery” statistics that are an affront
to every American struggling just to stay afloat. Supposedly, and for better
or worse, a little more than two-thirds of the nation’s GDP comes from
consumption. If the retail sector is dying, as anyone can see it is, how can
there be this steady stream of news about a recovery? Maybe
there’s a recovery on Wall Street, but no one we know views the good
fortune of bankers, IPO artists and other paper-pushers as remotely
reflecting a genuine, broad-based economic recovery.
Rick Ackerman
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