I remember when that happened in the 80's. It was and is known as the "see through building era."
I looked at the blog fotos. A lot of these building will need maintenance or they will quickly become useless shells and eyesores.
It looks like a bad movie set. And on March 3, the monsters came and ate everyone. Nobody was left behind. They even ate the diabetics claiming they were sweeter.
I've done a fair amount of business travel up and down the California coast lately, and while I didn't see a lot of completely empty office/R&D complexes, I did run across a number that were half-empty.
The signs: front parking lot partly full, back lot empty; prominent "for lease" sign with something like "5-30000 sq ft, divisible). There's a lot of that out there.
well our tenants are signed and delivered and we break ground in 6 weeks. just had the final meeting with the bankers and we're before committee on thursday next week.
cross your fingers for me because this will keep me working for myself or have me working for the man sometime!
I think the optimistic view of the number of tenants willing and able to rent their new buildings will hurt a lot up here in Ventura County. There is a bunch of buildings coming on line and between the general economy slowing and Countrywide possibly getting moved (rumor) I think there will be plenty of commercial space available without any future building.
The really depressing part of all this is the mention that this was productive farmland not so long ago. What a waste.
When petrochemicals and gasoline are in short supply in the not so distant future, agricultural productivity per acre will drop and we'll wish we had the extra acreage.
2007 yoy wholesale inflation was 6.3%, the largest annual increase in 26 years. On top of that, consumer price inflation (CPI) increased at 4.1% in 2007, the largest increase in 17 years.
Good thing inflation "expectations" remain reasonably well anchored.
Very nice work Max. The pictures tell the sad story of auto-centric suburban sprawl all over this country. This depresses me so much, when I think of the wasted land, energy and resources and the total lack of vision at all levels of government that has allowed all this to take place.
GULP! The next shoe drops just as CR predicted. Bravo although I wish you had been wrong. :>)! The credit contraction is about to pick up some real steam. MOMMY!
By the way folks, I just finished my February Strategy report. If any of you want to read it, shoot me an e-mail at dvandijk@zacks.com and I will send you a copy. Free to CR readers only (well and a few friends and family)
Declining real wages. Record amounts of household debt. The highest yoy inflation rates in almost two decades. Falling stock and house prices. Record low household savings rates. Increasing forclosures. A credit crisis. Negative real interest rates.
But at least we have lots and lots of retail space. Glad for that.
Reminds me of an episode I read somewhere--British reporters asked a cabinet minister if the situation was a crisis, and he said something like, "no, but I wish it was," meaning that the government and the public only accept dramatic policy shifts when a crisis forces that.
So is this situation becoming a crisis? I have no idea. And I know that a crisis is likely to be painful--for me personally, and for lots of other people. But maybe we emerge from that crisis through a real change in behavior and policy that enables our civilization to muddle along for a few more generations. Groping for the silver lining here.
Max, excellent and terrifying post over there . . . you were also posted on eschaton (Atrios) . . . which is the blogworld big time. Congrats on landing on two of my fave blogs in one afternoon!
There was a major shift in retail development planning a few years ago. Before then, companies would do supply/demand studies to determine where to open new locations. You needed to show the feasibility of having so many households and so much income within a given radius.
Then, companies changed their expansion focus from serving a community to taking share from competitors. This was inspired, in part, by the idea of clustering. As described in the book "Good to Great's" case study of Walgreens:
"Walgreens linked its convenience concept to a simple economic idea, profit per customer visit. Tight clustering (nine stores per mile)! leads to local economies of scale, which provides the cash for more clustering, which in turn draws more customers."
The basic idea of clustering is to overwhelm and drive out competition. But if everybody is clustering stores, everybody is the competition, and you end up with vast retail overcapacity.
Another stupid concept that didn't work in the long run.
Max has done an awesome job with his photologs. As someone who lived in Sacto just a few years ago I will attest that 99% of that empty retail is completely unnecessary and will remain so for years. But this is the same all up and down CA. Almost every commercial building/complex has a for lease sign it seems. Another new one just popped up down the road from my office. Add several thousand more vacant feet to the inventory!
Max, visit your blog regularly. Nice job all around. I think I drove through there on my way to the airport last week.
Stunning.
There's going to be a lot of that in th SF Valley coming soon. I know several older strip malls that are empty because the clients moved to newer digs up the street.
Driving the 101 through Ventura County is mind boggling.
I'm working on a 5 story spec office building in SoCal. There are 4 other brand new buildings on the same street. But the truly scary fact is every building on the street has a vacancy sign in front of it. (Granted it might be the most frothy street in the business district)
Some regions are really going to take it in the shorts. SoCal (Irvine, parts of LA and lots of San Diego) is going to be a painful place...
If the median home price drops from $400,000 to $350,000 that changes the whole neighborhood, he says.
That's a very odd statement.
All things being equal, a brand new $400K mhp neighborhood would be marginally more affluent than a $350K mhp neighborhood. OTOH, if you simply take a $400K mhp neighborhood that's now $350K, it's still mostly the same people (i.e., same incomes, etc.).
Of course, the idea that $350K to $400K is anything BUT affluent is sheer bubble insanity anyway.
As described in the book "Good to Great's" case study of Walgreens
When I lived in Vegas, the joke was that all the locals thought Walgreens was a front for laundering money because they didn't sell alcohol nor have a restricted gaming license for slot machines .....
OT - Did anyone notice this story?.....Bernanke utilizes speech consultants, on the fly, to improve his communication skills.
Three months earlier -- on Oct. 2 -- Bernanke had a two-hour meeting with communications expert Andrew Gilman, president of CommCore Consulting Group.
...
Gilman worked with Bernanke on speech delivery, according to both Gilman and Fed spokeswoman Michelle Smith. Gilman's bio says he has worked as a communications strategist and a crisis counselor. Gilman's session with Bernanke, however, did not involve crisis management, Smith and Gilman said.
If I were Fed chairman, I would have chosen Tony Robbins.
Here in the north-eastern part of the Santa Clara Valley (Santa Clara, North San Jose, Milpitas) the situation is similar. What I find particularly funny is that developers are building at a fairly good clip despite many empty buildings still being left over from the dot com crash (there's about half a million square feet in my office park alone that has been vacant since the '90s) and they're building new 4 story buildings half a mile from me. It just doesn't make sense to me, but maybe I'm just not sophisticated enough to understand.
Feb. 15 (Bloomberg) -- The world's biggest banks may have to book as much as $203 billion of writedowns, in addition to the $152 billion reported so far, if bond insurers the lenders rely on become insolvent, UBS AG said
"Median real incomes declined 1.4% in 2007. Household incomes fell 2% from 2000 to 2006.
2007 yoy wholesale inflation was 6.3%, the largest annual increase in 26 years. On top of that, consumer price inflation (CPI) increased at 4.1% in 2007, the largest increase in 17 years."
b-b-b-but Karl Rove says the economy's fine, it's just the media that are making it sound bad. I say that the Islamofascists are inventing all this bad data. Things are actually really, really great. Especially here in Michigan.
And then, according to our Intel services, there are the Chinese and the Russians who are waging economic war on us and making all this happen. Those nasty nasty Chinese, selling us things so cheap we can afford to buy them.
Gunworld is pretty nice. I got a Glock 10mm, one of the few places that has it in stock consistantly.
tj, jeff,
You been out to Pasadena, around lake street lately. Gah.
The only place that seems relatively quiet build wise is The People's Republic of Santa Monica.
The one building I've been eyeing for a year is the Mortgage building at the 101 405 interchange. Half the building is now vacant. And now the building also sports another name as well as the Mortgage co's:
Devry.
LOL.
Guess the brokers and other staff need retraining.
Everything in that photo montage in the bottom would make a good light industrial facility. The trend in industrial building design over the last 30 years or so has been to make them look less hideous and to make them also usable for a wide variety of purposes.
"Uh, where are the factories? It is understood, of course, that profit in an economy stems from what is actually made?"
That's so, like, 1965.
But as Winston says, a lot of retail would make decent light-industrial space, especially the high-ceiled tilt-up type: add a loading dock, extra electrical capacity, maybe some heavier-duty ventilation, and you're in business. And a lot of them already have the loading dock anyway.
Santa Monica does seem to be weathering the storm reasonably well for now. I was out there this weekend and there did not seem to be a significantly higher number of houses for sale, though pricing has clearly been impacted.
I've dealt with many companies and banks in Woodland Hills recently and the CRE space in that area is emptying at terrifying speeds. Douglas Emmett Mgmt seems to be completely incapable of understanding that there is a downturn.
tj & the bear writes:
If the median home price drops from $400,000 to $350,000 that changes the whole neighborhood, he says.
That's a very odd statement.
Very odd indeed. I read that and wondered, "What causes an inflection point somewhere between $350k and $400k? And where is the graph anyway?"
Must stop thinking in graphs!
Thanks for the complements everybody. 15,000 hits, which is about 30 times my average! My adsense is up to $10 today, which almost gets me to minimum wage for that post.
But as Winston says, a lot of retail would make decent light-industrial space, especially the high-ceiled tilt-up type: add a loading dock, extra electrical capacity, maybe some heavier-duty ventilation, and you're in business. And a lot of them already have the loading dock anyway.
Boy you know we've come a long way from really making stuff when Banana Republic stores are mistaken for potential factories.
Not trying to single out Bob or anyone else but just for a second - look at your life and see the stuff around you... then ask: how much of that could (1) even be made in a Banana Republic store and if made there made 'economically'? Economically enough to kick China & India ass?
I suppose if you consider making 'Cold Stone Creamery' output 'manufacturing' then maybe those qualify as 'factories'... But not too many generators parts used in the systems to power all those Cali air conditioners next summer gonna be made in those buildings.
Even the small part molders I call on couldn't site there - not enough concrete to support their machines.
But then maybe I'm just cranky 'cause I'm the last 'Merican alive who still walks factory floors. Sometimes I feel like the dead Martians in Bradbury's 'Martian Chronicles'.
Max, great job on the photoblog. I left one of the Anons.
dc1000, hope it goes well before the committee.
others, it's "good" to hear that the overbuilding is everywhere and not just in my small part of the godforsaken barren desert. Actually, we probably have only 100,000 sf of see-throughs to deal with now, so even when adjusted for population, it doesn't seem as bad as Sacramento and populated SoCal.
dryfly, nobody really meant factories. What passes for light industrial in California is T-shirt production and then only silk screening.
"Not trying to single out Bob or anyone else but just for a second - look at your life and see the stuff around you... then ask: how much of that could (1) even be made in a Banana Republic store and if made there made 'economically'? Economically enough to kick China & India ass?"
I'm thinking mainly of the warehouse-style stores, which we have a lot of around here: 20-30 foot ceilings, concrete floors, exposed ventilation, etc., etc.
I know what you're saying about "real factories;" I stare at the abandoned Lipton plant across the street eight hours a day. Part of my outfit works out of a former chip fab. On the other hand, there was a thriving small-shop furniture industry here until about ten years ago when a combination of rising rents and cheaper foreign competition drove it out of business. There still are a lot of smaller machine shops and fabricators working out of cheap warehouses around here that I wouldn't keep a dog in. They could all do well in a former PetsMart.
Moreover, I remember when the first wave of big-box stores faltered back in the '60s. One of them became a window factory that my cousin got his first job in; a big barn of a place.
No, you won't see many lathes in a Banana Republic. But an abandoned Walmart? There are possibilities.
Any of you Silicon Valley sorts able to enlighten me on how all the building owners aren't out of business? The area along 237 all the way down its length has been mostly vacant since 2001. I suppose lately IBM and Force10 and others have moved in, but that has to be at "red ink" prices for the property companies. Are they realy making enoug off of Invidia, Google, and Yahoo to cover their losses? Or perhaps the original owners have gone belly up and the new owners got it at enough discount that they are okay? To see a stack of 8-story buildings going up at Moffett makes me think shortly everyone's margins weill be zero.
I remember when that happened in the 80's. It was and is known as the "see through building era."
I looked at the blog fotos. A lot of these building will need maintenance or they will quickly become useless shells and eyesores.
It looks like a bad movie set. And on March 3, the monsters came and ate everyone. Nobody was left behind. They even ate the diabetics claiming they were sweeter.
Macklowed will become a verb much like Borked.
Thanks for the mention, CR! That post took over two hours to put together, so I'm glad a wider audience is checking it out.
This is so disappointing. I was looking forward to an Applebee's and a Banana Republic at every intersection.
YouTube
- Broadcast Yourself.
I've done a fair amount of business travel up and down the California coast lately, and while I didn't see a lot of completely empty office/R&D complexes, I did run across a number that were half-empty.
The signs: front parking lot partly full, back lot empty; prominent "for lease" sign with something like "5-30000 sq ft, divisible). There's a lot of that out there.
well our tenants are signed and delivered and we break ground in 6 weeks. just had the final meeting with the bankers and we're before committee on thursday next week.
cross your fingers for me because this will keep me working for myself or have me working for the man sometime!
I think the optimistic view of the number of tenants willing and able to rent their new buildings will hurt a lot up here in Ventura County. There is a bunch of buildings coming on line and between the general economy slowing and Countrywide possibly getting moved (rumor) I think there will be plenty of commercial space available without any future building.
Nice work, Max. And it is frightening.
Maybe they should read "light industrial space 5000-30000 ft suitable for crank production or indoor pot farming."
eutron bomb, baby!
Man o man is that depressing!
Depressed? Maybe these economic stats will cheer you up:
Median real incomes declined 1.4% in 2007. Household incomes fell 2% from 2000 to 2006.
Maybe more retail space is not what we need right now.
"Maybe they should read "light industrial space 5000-30000 ft suitable for crank production or indoor pot farming."
Wouldn't work; blacking out all the windows would raise suspicion. Also, PG&E does a fine job of narking out indoor growers for the cops.
As for the neutron bomb comment: what we really need is a bomb that destroys the buildings but leaves the people, not vice versa!
The really depressing part of all this is the mention that this was productive farmland not so long ago. What a waste.
When petrochemicals and gasoline are in short supply in the not so distant future, agricultural productivity per acre will drop and we'll wish we had the extra acreage.
But wait, it gets better. Uhmm, actually worse:
2007 yoy wholesale inflation was 6.3%, the largest annual increase in 26 years. On top of that, consumer price inflation (CPI) increased at 4.1% in 2007, the largest increase in 17 years.
Good thing inflation "expectations" remain reasonably well anchored.
Not too far from the truth!
Local News: West Palm Beach, Palm Beach County, Martin & St. Lucie Counties | The Palm Beach Post
Port St. Lucie homebuilder arrested in pot scheme
What is a good short in Commercial RE ?
Ahh, but there is more.
From 2005 through 2007, household savings was just about exactly ZERO.
From 2002 through 2007, consumer debt increased 2.4 trillion more than personal disposable income.
Very nice work Max. The pictures tell the sad story of auto-centric suburban sprawl all over this country. This depresses me so much, when I think of the wasted land, energy and resources and the total lack of vision at all levels of government that has allowed all this to take place.
I need a drink.
Jeez, sure hope those pics were taken at 6:30 AM on a Sunday. Kind of reminds me of Jersey in 91.
GULP! The next shoe drops just as CR predicted. Bravo although I wish you had been wrong. :>)! The credit contraction is about to pick up some real steam. MOMMY!
By the way folks, I just finished my February Strategy report. If any of you want to read it, shoot me an e-mail at dvandijk@zacks.com and I will send you a copy. Free to CR readers only (well and a few friends and family)
So, we have:
Declining real wages. Record amounts of household debt. The highest yoy inflation rates in almost two decades. Falling stock and house prices. Record low household savings rates. Increasing forclosures. A credit crisis. Negative real interest rates.
But at least we have lots and lots of retail space. Glad for that.
So where is all the talk now about CRE saving the economy?
where is idoc? miss him/her
If you build it they will come.
Kind of like Says law: supply creates its own demand.
Yeah, that works for me.
Reminds me of an episode I read somewhere--British reporters asked a cabinet minister if the situation was a crisis, and he said something like, "no, but I wish it was," meaning that the government and the public only accept dramatic policy shifts when a crisis forces that.
So is this situation becoming a crisis? I have no idea. And I know that a crisis is likely to be painful--for me personally, and for lots of other people. But maybe we emerge from that crisis through a real change in behavior and policy that enables our civilization to muddle along for a few more generations. Groping for the silver lining here.
Max, excellent and terrifying post over there . . . you were also posted on eschaton (Atrios) . . . which is the blogworld big time. Congrats on landing on two of my fave blogs in one afternoon!
SRS is 2x the inverse
Max, if you didn't take those pictures at 6:30 in the morning, where are all of the personal conveyance vehicles (cars)?
There was a major shift in retail development planning a few years ago. Before then, companies would do supply/demand studies to determine where to open new locations. You needed to show the feasibility of having so many households and so much income within a given radius.
Then, companies changed their expansion focus from serving a community to taking share from competitors. This was inspired, in part, by the idea of clustering. As described in the book "Good to Great's" case study of Walgreens:
"Walgreens linked its convenience concept to a simple economic idea, profit per customer visit. Tight clustering (nine stores per mile)! leads to local economies of scale, which provides the cash for more clustering, which in turn draws more customers."
The basic idea of clustering is to overwhelm and drive out competition. But if everybody is clustering stores, everybody is the competition, and you end up with vast retail overcapacity.
Another stupid concept that didn't work in the long run.
Max has done an awesome job with his photologs. As someone who lived in Sacto just a few years ago I will attest that 99% of that empty retail is completely unnecessary and will remain so for years. But this is the same all up and down CA. Almost every commercial building/complex has a for lease sign it seems. Another new one just popped up down the road from my office. Add several thousand more vacant feet to the inventory!
rich, with apologies to Keynes,
In the long run, we're all broke.
Max, visit your blog regularly. Nice job all around. I think I drove through there on my way to the airport last week.
Stunning.
There's going to be a lot of that in th SF Valley coming soon. I know several older strip malls that are empty because the clients moved to newer digs up the street.
Driving the 101 through Ventura County is mind boggling.
Cheers,
Wait a minute... this is a promo for that Discovery Channel show, "Life After People", right?
With a name like Deatherage, what did you think would happen?
Misean,
Heck, driving around Burbank there's commercial space available on damn near every block.
Max,
Your work shows great dedication to the cause of bubble blogging. Seeing is believing!
I'm working on a 5 story spec office building in SoCal. There are 4 other brand new buildings on the same street. But the truly scary fact is every building on the street has a vacancy sign in front of it. (Granted it might be the most frothy street in the business district)
Some regions are really going to take it in the shorts. SoCal (Irvine, parts of LA and lots of San Diego) is going to be a painful place...
If the median home price drops from $400,000 to $350,000 that changes the whole neighborhood, he says.
That's a very odd statement.
All things being equal, a brand new $400K mhp neighborhood would be marginally more affluent than a $350K mhp neighborhood. OTOH, if you simply take a $400K mhp neighborhood that's now $350K, it's still mostly the same people (i.e., same incomes, etc.).
Of course, the idea that $350K to $400K is anything BUT affluent is sheer bubble insanity anyway.
OK its Friday after the close before a three day weekend...cue the confessional waltz?
freebirdinblue writes:
where is idoc? miss him/her
freebirdinblue
thanks for asking about me. i'm still here but was skiing in Mammoth the last wk. also been actively trading intraday so little time to post.
nothings changed in the shorting strategy.
OK its Friday after the close before a three day weekend...cue the confessional waltz?
Ha hahahhaa
Whos got the first dance? And whats the tempo...
As described in the book "Good to Great's" case study of Walgreens
When I lived in Vegas, the joke was that all the locals thought Walgreens was a front for laundering money because they didn't sell alcohol nor have a restricted gaming license for slot machines .....
Tanta,
Any chance you'll weigh in on the SIFMA press release?
tj,
Yeah, I drive through Burbank a lot. Got to get to Gunworld from time to time.
But the stuff along the 101 through Ventura is all new stuff along the highway. And still being built.
Cheers,
OT - Did anyone notice this story?.....Bernanke utilizes speech consultants, on the fly, to improve his communication skills.
Three months earlier -- on Oct. 2 -- Bernanke had a two-hour meeting with communications expert Andrew Gilman, president of CommCore Consulting Group.
...
Gilman worked with Bernanke on speech delivery, according to both Gilman and Fed spokeswoman Michelle Smith. Gilman's bio says he has worked as a communications strategist and a crisis counselor. Gilman's session with Bernanke, however, did not involve crisis management, Smith and Gilman said.
If I were Fed chairman, I would have chosen Tony Robbins.
What tj & the bear said @ 4:41
Misean,
Haven't been in there yet; bought some at Stevenson Gun Country on occasion. Good stuff at GW?
Here in the north-eastern part of the Santa Clara Valley (Santa Clara, North San Jose, Milpitas) the situation is similar. What I find particularly funny is that developers are building at a fairly good clip despite many empty buildings still being left over from the dot com crash (there's about half a million square feet in my office park alone that has been vacant since the '90s) and they're building new 4 story buildings half a mile from me. It just doesn't make sense to me, but maybe I'm just not sophisticated enough to understand.
BTW, Krugman has a nice chart showing UMI consumer confidence now lower than any time in 2001. Wicked.
tj and Misean,
Good grief, didn't realize that you were SF Valley people. I'm in Burbank too.
You should drive down Chandler sometime if you want a laugh. 1,000 sqft houses on half-sized lots going for ~700k.
On the CRE front NBC is moving their studio onto Universal's lot and I really wonder if Disney is actually going to buy it...
Stunning pictorial, Max.
The glitzy markets, CA, NV and FL, ar3en't the only ones experiencing "unexpected" reversals.
Philadelphia underwent a CRE boom for the last seven to ten years. In the last year, I've seen:
-- A promised 5-tower condo scheme on the waterfront; 2 towers completed and (apparently) near empty, the other 3 never broke ground.
-- A small footprint condo tower (1000/SF/floor) @ $1.9mil/floor... unfinished.
-- Condo tower in Northern Liberties, unfinished.
-- Factory rehab to condos in Fishtown. (This one I worked on.) 14 units, @ 300K. Unfinished.
-- Holes/vacant lots throughout Northern Liberties (the up and coming neighborhood,) with "Will Develop" signs whose paint is fading to illegible.
jeff,
You see that monster building they're putting up next to St. Joseph's on the old CNBC lot? Does seem that work has slowed a bit, though...
No kidding. They were working like mad and making considerable progress in a short amount of time, but now you barely see anyone there.
Oops.
apologies if this has already been posted...
Bloomberg: Banks at Risk of $203 Billion in Writedowns, Says UBS
Feb. 15 (Bloomberg) -- The world's biggest banks may have to book as much as $203 billion of writedowns, in addition to the $152 billion reported so far, if bond insurers the lenders rely on become insolvent, UBS AG said
Thanks CR for the link. Those pictures from Sacramento are stark and very eerie. Reminds me of "Resident Evil" or "I Am Legend".
They will always remind us of the time of opulence, followed by swift downturn...
good to hear from you. I always find your posts helpful.
"Median real incomes declined 1.4% in 2007. Household incomes fell 2% from 2000 to 2006.
2007 yoy wholesale inflation was 6.3%, the largest annual increase in 26 years. On top of that, consumer price inflation (CPI) increased at 4.1% in 2007, the largest increase in 17 years."
b-b-b-but Karl Rove says the economy's fine, it's just the media that are making it sound bad. I say that the Islamofascists are inventing all this bad data. Things are actually really, really great. Especially here in Michigan.
What happened to Jill and Wesker?
And then, according to our Intel services, there are the Chinese and the Russians who are waging economic war on us and making all this happen. Those nasty nasty Chinese, selling us things so cheap we can afford to buy them.
Re: photolog
Uh, where are the factories? It is understood, of course, that profit in an economy stems from what is actually made?
Maybe the Armed forces (or Blackwater) can use the empty offices to practice their urban warfare techniques-
tj,
Gunworld is pretty nice. I got a Glock 10mm, one of the few places that has it in stock consistantly.
tj, jeff,
You been out to Pasadena, around lake street lately. Gah.
The only place that seems relatively quiet build wise is The People's Republic of Santa Monica.
The one building I've been eyeing for a year is the Mortgage building at the 101 405 interchange. Half the building is now vacant. And now the building also sports another name as well as the Mortgage co's:
Devry.
LOL.
Guess the brokers and other staff need retraining.
Cheers,
unirealist,
Everything in that photo montage in the bottom would make a good light industrial facility. The trend in industrial building design over the last 30 years or so has been to make them look less hideous and to make them also usable for a wide variety of purposes.
Heaven forbid that I open my high end retail establishment in a neighborhood where homes cost only 350k. How downscale can you get?
"Uh, where are the factories? It is understood, of course, that profit in an economy stems from what is actually made?"
That's so, like, 1965.
But as Winston says, a lot of retail would make decent light-industrial space, especially the high-ceiled tilt-up type: add a loading dock, extra electrical capacity, maybe some heavier-duty ventilation, and you're in business. And a lot of them already have the loading dock anyway.
tj, Misean,
Santa Monica does seem to be weathering the storm reasonably well for now. I was out there this weekend and there did not seem to be a significantly higher number of houses for sale, though pricing has clearly been impacted.
I've dealt with many companies and banks in Woodland Hills recently and the CRE space in that area is emptying at terrifying speeds. Douglas Emmett Mgmt seems to be completely incapable of understanding that there is a downturn.
tj & the bear writes:
If the median home price drops from $400,000 to $350,000 that changes the whole neighborhood, he says.
That's a very odd statement.
Very odd indeed. I read that and wondered, "What causes an inflection point somewhere between $350k and $400k? And where is the graph anyway?"
Must stop thinking in graphs!
Any pointers to the big players in CRE and their exposures to the seemingly obvious over-capacity?
rich / idoc / Shnapps / Misean / energyecon ...anyone?
Much appreciated.
Thanks for the complements everybody. 15,000 hits, which is about 30 times my average! My adsense is up to $10 today, which almost gets me to minimum wage for that post.
Blogging is truly a labor of love.
NYC suburbs (Connecticut / Westchester County NY) don't appear to have any problems with CRE. I don't see many vacancies.
Its just see all that farmland go to waste and greed.
Wake up America!
But as Winston says, a lot of retail would make decent light-industrial space, especially the high-ceiled tilt-up type: add a loading dock, extra electrical capacity, maybe some heavier-duty ventilation, and you're in business. And a lot of them already have the loading dock anyway.
Boy you know we've come a long way from really making stuff when Banana Republic stores are mistaken for potential factories.
Not trying to single out Bob or anyone else but just for a second - look at your life and see the stuff around you... then ask: how much of that could (1) even be made in a Banana Republic store and if made there made 'economically'? Economically enough to kick China & India ass?
I suppose if you consider making 'Cold Stone Creamery' output 'manufacturing' then maybe those qualify as 'factories'... But not too many generators parts used in the systems to power all those Cali air conditioners next summer gonna be made in those buildings.
Even the small part molders I call on couldn't site there - not enough concrete to support their machines.
But then maybe I'm just cranky 'cause I'm the last 'Merican alive who still walks factory floors. Sometimes I feel like the dead Martians in Bradbury's 'Martian Chronicles'.
Max, great job on the photoblog. I left one of the Anons.
dc1000, hope it goes well before the committee.
others, it's "good" to hear that the overbuilding is everywhere and not just in my small part of the godforsaken barren desert. Actually, we probably have only 100,000 sf of see-throughs to deal with now, so even when adjusted for population, it doesn't seem as bad as Sacramento and populated SoCal.
dryfly, nobody really meant factories. What passes for light industrial in California is T-shirt production and then only silk screening.
Dryfly:
"Not trying to single out Bob or anyone else but just for a second - look at your life and see the stuff around you... then ask: how much of that could (1) even be made in a Banana Republic store and if made there made 'economically'? Economically enough to kick China & India ass?"
I'm thinking mainly of the warehouse-style stores, which we have a lot of around here: 20-30 foot ceilings, concrete floors, exposed ventilation, etc., etc.
I know what you're saying about "real factories;" I stare at the abandoned Lipton plant across the street eight hours a day. Part of my outfit works out of a former chip fab. On the other hand, there was a thriving small-shop furniture industry here until about ten years ago when a combination of rising rents and cheaper foreign competition drove it out of business. There still are a lot of smaller machine shops and fabricators working out of cheap warehouses around here that I wouldn't keep a dog in. They could all do well in a former PetsMart.
Moreover, I remember when the first wave of big-box stores faltered back in the '60s. One of them became a window factory that my cousin got his first job in; a big barn of a place.
No, you won't see many lathes in a Banana Republic. But an abandoned Walmart? There are possibilities.
Any of you Silicon Valley sorts able to enlighten me on how all the building owners aren't out of business? The area along 237 all the way down its length has been mostly vacant since 2001. I suppose lately IBM and Force10 and others have moved in, but that has to be at "red ink" prices for the property companies. Are they realy making enoug off of Invidia, Google, and Yahoo to cover their losses? Or perhaps the original owners have gone belly up and the new owners got it at enough discount that they are okay? To see a stack of 8-story buildings going up at Moffett makes me think shortly everyone's margins weill be zero.