IS THE SKY REALLY FALLING?

Implications: I think this article is important because it spreads a false sense of what is really happening in the industry. While I realize that many reporters exaggerate their premise to make for more interesting reading, this article crosses the line. In my opinion it is irresponsible to dress up an old hag that has been hanging around for over 40 years and pretend that she is a brand new lady worthy of our attention.  The uninitiated reader or analyst could be easily misled and this article could serve to "add fuel to the fire" of the speculation about the extent of the trouble supposedly surrounding commercial real estate.  

Analysis: If the GLG reader closely examines the reporters own numbers they will immediately see that this lead article in an important trade magazine is badly overstated. For example, the article shows the following list of store closings by year: 
2001---7041
2002---5950
2003---4973
2004---6303
2005---4269
2006---4730
2007---4607
2008---est.5770
So, in fact the store closings estimated for 2008 represents the mean or modal number over the last eight years, hardly anything to write home about!

There are two other significant internal contradictions. The reporter indicates that the increase in store closings "...might force landlords to start lowering rents and offering retailers to stay in place".

In the very next sentence she reports "...retail vacancies will rise 50 basis points in 2008, slowing effective rent growth to 2%"...  Well an increase of 2% is what is expected by all the national retailers and is generally built into leases as the base increase for each option period.  This is hardly a condition that could cause serious panic or dislocation in the commercial real estate sector.

However, I have saved the best quote for last. After four pages of whining and complaining about the terrible conditions in the commercial retail real estate markets, the reporter quotes a well respected national brokerage firm that says "What happens in markets like these is that everyone gets scared, and even if retailers start doing more transactions,THEY WILL DO THEIR DUE DILIGENCE AND ONLY OPEN STORES IN GOOD LOCATIONS"!

Maybe it is a good thing to force retailers to do what they should have been doing all along. Maybe it is a bad thing to be so bloated by low interest and easy money that retailers open stores without doing their necessary due diligence.