Comments on: Commercial Real Estate May Be the Next to Fall http://www.dailyreckoning.com.au/commercial-real-estate-next-to-fall/2008/12/03/ An independent perspective on the Australian and global investment markets Sat, 21 Nov 2009 10:39:45 -0600 http://wordpress.org/?v=2.8 hourly 1 By: Greg Atkinson http://www.dailyreckoning.com.au/commercial-real-estate-next-to-fall/2008/12/03/comment-page-1/#comment-55469 Greg Atkinson Thu, 04 Dec 2008 02:22:17 +0000 http://www.dailyreckoning.com.au/?p=4544#comment-55469 Nothing to get too worked up about regarding commercial real estate. I suspect the "bears" will drag out the usual downturn stories from bank woes to the little ice cream shop that closed after 25 years. The fact is shops are always closing down in malls but of course during a recession a few more will fail, and we will take more notice of these failings. (and the good old media will highlight these failures) The Starbucks situation has little to do with the credit crisis. Starbacks over expanded and grew too big too fast...it happens. It also suffered from being too successful in that others saw there was money to made in a cup of coffee and competitors popped up everywhere. Starbucks acknowledged themselves a few years ago they had problems and would be closing stalls. Of course the situation is bad, but this article in DR is simply misleading. Nothing to get too worked up about regarding commercial real estate. I suspect the "bears" will drag out the usual downturn stories from bank woes to the little ice cream shop that closed after 25 years. The fact is shops are always closing down in malls but of course during a recession a few more will fail, and we will take more notice of these failings. (and the good old media will highlight these failures)

The Starbucks situation has little to do with the credit crisis. Starbacks over expanded and grew too big too fast...it happens. It also suffered from being too successful in that others saw there was money to made in a cup of coffee and competitors popped up everywhere. Starbucks acknowledged themselves a few years ago they had problems and would be closing stalls.

Of course the situation is bad, but this article in DR is simply misleading.

]]> By: Jon Bain http://www.dailyreckoning.com.au/commercial-real-estate-next-to-fall/2008/12/03/comment-page-1/#comment-55445 Jon Bain Wed, 03 Dec 2008 23:46:38 +0000 http://www.dailyreckoning.com.au/?p=4544#comment-55445 The cause of all of this in one short phrase: A corrupt legal system. The cause of all of this in one short phrase:

A corrupt legal system.

]]> By: Mall Burned http://www.dailyreckoning.com.au/commercial-real-estate-next-to-fall/2008/12/03/comment-page-1/#comment-55322 Mall Burned Wed, 03 Dec 2008 05:45:58 +0000 http://www.dailyreckoning.com.au/?p=4544#comment-55322 I have been saying this for the last 4 years as having run a chain of small businesses in the major malls most survive on wages as income and buying a job as the ROI on the investment and depreciation over 5 years on fit out doesnt work finacially. You can do better as a bank clerk (until recently) on 50K PA why be in business if there is no profit for the 24/7 committment. Many were trapped trying to amortise their capital over multiple lease periods, but surviving. This model for lessee serfdom is not sustainable and subsequently the profits of the mall operators will fall as the serfs can no longer pay rental and walk away. The proliferation of sushi operators is because they have best margins. Rentals and property values will have to fall based on sales at store level, and these are heading for the floor, especially discretionary stuff like juice and coffee. I have been saying this for the last 4 years as having run a chain of small businesses in the major malls most survive on wages as income and buying a job as the ROI on the investment and depreciation over 5 years on fit out doesnt work finacially.
You can do better as a bank clerk (until recently) on 50K PA why be in business if there is no profit for the 24/7 committment.
Many were trapped trying to amortise their capital over multiple lease periods, but surviving. This model for lessee serfdom is not sustainable and subsequently the profits of the mall operators will fall as the serfs can no longer pay rental and walk away.
The proliferation of sushi operators is because they have best margins. Rentals and property values will have to fall based on sales at store level, and these are heading for the floor, especially discretionary stuff like juice and coffee.

]]>