The Decline And Fall Of American Malls And Hotels

Left: Malls.

Left: Lodging.

















Not like the salad days of the 1980's, no sirree!:

Investment in multimerchandise shopping structures (malls) peaked in 2007 and has fallen by over 50% (note that investment includes remodels, so this will not fall to zero). Mall investment is also at an all time low (as a percent of GDP) and will probably continue to decline through 2010.

Reis reported that the mall vacancy rate in Q1 2010 was the highest on record at 8.9% for regional malls, and the highest since 1991 for strip malls.

...The recent boom in lodging investment was stunning. Lodging investment peaked at 0.32% of GDP in Q2 2008 and has fallen by almost 2/3rds already..

Graphs like these are important in helping refute arguments (a favorite staple among the more Republican, suburban set) that Freddie Mac and Fannie Mae's recent exuberance in lending was primarily responsible for our current recession.

First, residential subprime lending was dominated by other, private lenders (e.g., Countrywide). Freddie Mac and Fannie entered that game late.

More importantly, lending for non-residential investments like malls and hotels generally comes from banks and that lending also boomed in the late 2000's. The common element in all three crashes (residential, office, retail) was that the investments for all three were traded as toxic securities on Wall Street. Trying to pin all the blame on the "Patsies" (who, in this recession, go by the names of Freddie Mac and Fannie Mae) lets all the other bad actors off scott-free.

Not that Freddie Mac and Fannie Mae are blameless, of course. The entire economy was being run as a casino game - a Ponzi-like scheme - by Wall Street. The role of Freddie Mac and Fannie Mae was that of runners - simple flunkies, whose job it was was to get customers (i.e., marks: i.e., first-time home borrowers) in the door. But the runners weren't in charge: ultimately, the Wall Street folks (e.g., Goldman Sachs) were the folks running the game.