Mid-Year Review of the Retail Apocalypse – Keeps Coming Like a Waterfall

Wednesday, July 4, 2018
By Paul Martin

By David Haggith
July 3, 2018

For a year and a half I’ve been writing about the retail apocalypse that is going to add to US financial woes. This is not a problem created by economic collapse but a problem that I have said will greatly contribute to economic collapse and that is so massive and widespread that it assures some level of economic decline all on its own. As everyone knows, the problem is largely created by a change in shopping paradigms (mostly due to Amazon) that is shuttering brick and mortar stores as people shop online.

I generally avoid malls, but I had to do some mall shopping the other day, so I used the occasion to survey the condition of our local mall to see how the retail apocalypse was developing in my own hometown where the economy is vigorous. In my estimation, 10% of the shop spaces in the mall were boarded up. That may not sound like a terrible situation, but if you compare the mall to a town, any town that has 10% of its buildings shuttered is in serious economic recession. The town is literally decimated at that number. Imagine walking Main Street of a town you’ve never been in and every tenth store front is covered in plywood. You get a pretty strong impression that things are not going well in that region.

The news I read today confirmed that my local experience represents the national scene well. Retail vacancy rates top 10% in many cities — not just vacancy in malls but throughout the whole city!

“The amount of occupied retail real estate in 77 major U.S. metropolitan areas dropped by 3.8 million square feet (350,000 square meters) in the second quarter, the largest decline since 2009, according to a report by researcher Reis Inc. released Monday. (NewsMax)

I’m not saying 10% of the city is vacated; but 10% of its available retail space is vacated. That’s still a lot, given that we are, at best, at the midpoint of the retail apocalypse that I’ve been forecasting (along with many others).

The closure of all 800 Toys ‘R’ Us stores has done more to worsen the last quarter’s retail closure rate than any other retailer in any other quarter in almost a decade. The Toys ‘R’ Us collapse has joined many other retailers like Walmart, Penney’s and Sears that are closing stores. Sears just announced ten additional store closures to its list. It will be closing 78 stores in September. Sears has already closed over 500 stores in fifteen months. It has 900 stores that remain open.

Malls, similar to cities, are at a national vacancy rate of 8.6%, which is the highest number of mall shop vacancies since the end of the Great Recession. The Wall Street Journal reports that customers are also staying away from malls at a level not seen since the Great Recession. Shopping centers are running a little higher for closures at 10.2%.

So far, 2018 looks like it could beat the record that was set last year for the number of store closures in a single year if the second half continues to grow with new announcements at the rate it has been growing. Some reports say that more than 12,000 stores are expected to close this year versus last year’s 9,000, and the number slated for closure keeps growing. (Witness Sears’ new additions to their list.)

Now, think of what a full-blown trade war — just developing — might do to exacerbate that problem. Higher prices on imports can only mean fewer shoppers and probably more personal financial pressure to shop for better prices online.

The Rest…HERE

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