WAKE UP AND SMELL THE OVERSATURATION

Implications: In 1983 there was 29 square feet of retail space for every single person in the 54 largest U S markets. Today there is 38 square feet for every person in those same markets. One billion square feet have been added since 2000 driven in large measure by artificially cheap money and too much money chasing real estate deals. Now developers are facing one of the worst declines in shopping center occupancy rates since the 1990-1991 recession. However, because of the saturation levels it is generally agreed that this increase in vacancy rates will last long after the current recession has ended. 

Analysis: I can remember the debacle of the S&L crisis (you know, the one that was engineered in large part by John McCain's largest contributor and close friend,(and leading anti-semite) Mr. Keating and family) and the mantra of the severely wounded financial institutions---"there are no more dumb lenders"!!!!

How quickly things change. Not only are those "dumb lenders" still with us but they have reached new heights in "dumbness".

As this WSJ article so clearly points out, until the very day that money became tight, there were shopping center developers and lenders ready to add millions of square feet to some of the most oversaturated trade areas in America.

What were they thinking? Well just like the rest of society, when money is that cheap and plentiful, it is almost sinful not to borrow some and do something, anything, with it regardless of whether or not it makes any sense.

The Mall and Shopping Center REITs are now reaping the results of those activities. What is even more dangerous from an investment standpoint, is the continued deterioration of the bottom lines of conventional department store anchors which, even if there was no recession or oversaturation of new shopping centers, would cause the Mall REITs to start showing significant reductions in FFO and real net profits.