The First Domino to Fall: Retail-CRE (Commercial Real Estate)

Tuesday, January 21, 2014
By Paul Martin

Charles Hugh Smith
Oftwominds.com
January 21, 2014

The domino of retail CRE will not fall in isolation; it will topple the domino of debt next to it.

That the retail trade is stagnating has been well-established: for example, The Retail Death Rattle (The Burning Platform).

Equally well-established is the vulnerability of the bricks-n-mortar commercial real estate sector to this downturn: yesterday’s analysis by Mark G. makes the case: After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects.

I’d like to extend Mark’s excellent analysis a bit because it suggests that the retail CRE (commercial real estate) sector will likely be the first domino to fall in the next financial crisis–the one we all know is brewing.

Let’s start with two charts of retail that I have marked up: the first is a chart of retail traffic from The Burning Platform story above. Note the phenomenal building boom in retail space from 2000 to 2008: nine straight years of adding about 300 million square feet of retail space each year.

The Rest…HERE

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