America's dying malls have been a frequent topic for us over the past couple of years. And, with the S&P soaring to new highs each and every day while completely shaking off a swath of retail bankruptcies that have left malls with no option but to fill their empty spaces with high schools, doctors offices and grocery stores, you can imagine our intrigue.
And while we've tended to focus on the demand side of the retail equation, a chart published by Bloomberg (via CoStart Group) today helps to put the ridiculous growth in retail square footage in the U.S. into perspective. As an example, Bloomberg highlights the Cleveland market where developers have added 21 million square feet of retail space since 2000 despite having lost 90,000 residents over the same time.
Real estate developers built more than 21 million square feet of new store space in the Northeast Ohio metropolitan area from 2000 through the first three months of this year, increasing its retail footprint by 21 percent.
But while the new stores were moving in, the shoppers were moving out. The metro area’s population declined by more than 90,000 over a similar period, and it became a stomping ground for students of the dying American mall.
Across the U.S., retail real estate development that outpaced demand marked the early years of the new millennium. Now retailers are going bankrupt at a record rate, and hedge funds are betting against the commercial mortgages used to finance mall properties. Credit Suisse this month predicted that as many as 275 malls, a quarter of the U.S. total, will close in the next five years.
But Cleveland certainly hasn't been alone in their irrational retail building spree as most of the major cities across the country have seriously ramped up their retail square footage per capita.
Not surprisingly, cities like Chicago and Cleveland, which have experienced among the highest population declines to domestic migration, have seen some of the largest builds in retail square footage per capita.
Meanwhile, America's latest debt-fueled real estate bubble came despite online sales taking nearly 10% of overall retail spending over the same period.
Nothing solves a weak demand problem like more supply....