seen this theme a ton of places the last few years and it's a hedge fund favorite..

https://www.theatlantic.com/business...f-2017/522384/

thought this was very good piece on the subject.

i do think if there was no internet, everything would be perfectly fine for shopping centers.... having said that i would note my opinion that the glory days for nordstrom, macy's, sears, k-mart, jc penney etc. ended before the internet.

i do think that millenial behaviour is quite different. my own personal experience is they are in no hurry to get driver's licence whereas older generations were in major hurry

it's hard to believe that here in canada that retail leases were hot in 2009-2010. of course highly competitive online retailing to a large degree is mostly books in canada and i assume those leases are quite "cold" now i.e. not valuable.

i do think malls/stores need to do more to get consumers to visit their store. i think too much of their $$$$$ effort is in trying to sell things to people already at the store. that view is consistent with atlantic's story

People are too poor to shop. Wages haven't gone up. Any expendable income people have is usually spent on over-priced food and booze.

mark, i tend to agree and appreciate your response........ i was thinking of my local large shopping malls. doesn't sell much stuff that you actually need. sells stuff you want... typically these malls don't have wal-mart or grocery stores/pharmacies - where i live.

i think the article mentions that younger people tend to spend more money on experiences like bars and restaurants with friends.

nothing to do with malls, but i agree there's alot of spending competition. for instance, for something like lululemon, women also need to spend money on their hair, other clothes, boots/shoes, drinking, restaurants, travel, cell phones. so once you have a few lulu outfits you don't need any more.

I have some friends who work for Rue21 corporate office. One is 3 months pregnant. The just announced they are closing 400 stores. Articles say they're considering bankruptcy. Scary times for them

i shop mostly online, but even then not very much. malls are just so ****ty. ****ty stupid people all walking around getting in your way. they were OK when i was a kid and the internet was barely a thing yet.

i can see most of these places either going tits up or downsizing to about 10-20% of their original size.

A drivers license at 16 today is nothing like it was 20 years ago. Most states heavily restrict what you can do with a license until you're 18. As a result, most kids aren't in a rush or parents don't see the point in giving their kid a car if they aren't allowed to drive their brother or sister in it... much less be able to drive their friends around. That sense of freedom you got when getting your license doesn't really happen anymore.... well not until you turn 18.

In Canada there's certainly something to be said about the price of housing and food just destroying disposable income. In Canada at least, a 30 cent bump at the pumps, a 20% bump in food and a 2% bump of interest rates would take the whole house of cards down, or really start to topple it anyway. Even an abnormally cold winter or brutally hot summer would start to shake the foundation with how leveraged people are.

The amazing thing is you can take that average person in Toronto that saw their house value go from 500k to 1.5M (in some cases it's 500k to 1.2M on a shorter time frame). For every one of them that's smart enough to sell at 1.5m and move somewhere else for 400k, mortgage free, you've got 20 of them selling the 1.5m and moving into something BIGGER. I know so many people doing it. Really makes me sick. Man you can freeroll life! Why are you taking on BIGGER debt, and why in this phase of the housing cycle?

I get your point, but people don't want to live in Peterborough. They want to live in Toronto. A lot of people in the position to "cash out" on the real estate boom (two income middle-upper class plus families) wouldn't be able to find a rewarding job in a smaller city.

You're quite right that it's crazy to move up to a bigger house. But it's impossible to argue with people - year after year after year Canadians have lived in a world where the more you mortgage and leverage in your house, the richer you get. If you spend your time going around telling people to stop doing what has made everyone around them rich for as long as everyone can remember, you're not going to win a lot of people over.

Lotta nervous non-recourse lenders out there.

Many of these dead malls walking are well located for redevelopment, however.

I sort of agree, but I think that within 20 years, the US might have little choice but to morph many shopping centers into mini-communities for the elderly to live, or affordable housing. The infrastructure is there, as is ample parking. Think dorms, but on a larger scale.

I like the idea. They're well laid out for that with large climate controlled community living spaces, indoor park like areas (or areas easily converted) community eating areas with kitchens already in place, easily secured from the outside world for senior centers, easily navigated by golf carts and other rapid response vehicles and they're designed to be easily navigated by the elderly and handicapped.

Plus old people seem to love them as they flock there in droves just to go for a power walk.

I think the key to making this work is being able to negotiate deals with malls going out of business so that you can buy them and take possession immediately upon their closure. Preferably with your new maintenance team coming in a month or two ahead of time and learning the ins and outs of running the building.

Shopping malls left without maintenance and shut down for very long have a ton of maintenance issues and getting an old shut down building like that back up and running properly can be very expensive. Whereas just seamlessly taking possession of a maintained building that is up and running would be very easy and cheap.

"Live" shopping just doesn't make sense anymore. Not only is online cheaper in most cases, you get it delivered in a day or two. Plus the selection online is unlimited. They have every color, size, style imaginable. No more searching and ultimately not finding what you are looking for. If you can't find exactly what you want online it simply doesn't exist.

I broke a shoelace yesterday. I went on Amazon and ordered the exact shoelace I wanted as a replacement. It will arrive this afternoon. I coulda gone down to the mall or Walgreens or some place and found a replacement shoelace but I wouldn't have had near the selection or been able to find the exact perfect lace for the shoe in question.

I get everything online other than stuff like food and other consumables but that is showing signs of changing as well. There is just no reason for retail stores now that online has gotten so good when comparing price, selection and very quick delivery.

When I was young and poor all of my expendable income went into food and drink just like the kids today so that argument always makes less sense to me. I guess we spent more on gas but they spend it on Uber and cellphone plans. We weren't dropping our paychecks at Sears or JC Penneys for "stuff" other than clothes and I assume the kids of today are spending some dough on clothes as well.

very interesting discussion in general by everyone and i could not agree more with your comments.

i'm in canada - not good for online retail - but if i was in big usa city i would definitely think of going 80%+ onlne retail. and i do think that online retail works for things it wasn't supposed to like clothing and jewelry. have had great experiences with both using USA addresses at different times.

the "people in toronto don't want to live in peterborough" is interesting. have to give it some thought. i lived in toronto for long time and know the bay street/UCC/muskoka culture very well. and from that i'd extend my analysis/thought more to middle class.

why has the toronto real estate market gone so crazy? to me, it's timing is suspicious as it coincides with BC's non-resident real estate tax.

are there any cities on earth that are more condo-intensive than vancouver and toronto? as people in canada undoubtedly saw in the last week is that gas stations have become hot real estate. the chevron station across from westin bayshore - howard hughes old home - went for $70MM+....... a rich individual in vancouver is #1 condo developer in san diego but i'm thinking it's not that hard as there aren't that many condo's there - cali has some harsh property tax rules.

as per shopping centres to condo's, it makes incredible sense.

would the mall owners be able to do that? or would their mortgage holders say "we lent you that money to build/own/operate a shopping mall"? surely the land owner if different from mall owner would say that.

i agree with everything you said.....

not sure how hot usa real estate is. i think not that hot... BUT, i do wonder if long rates can ever go up 2%-3% again as it would kill housing prices, kiling the economy and bringing rates down again - hopefully bring rates down again.

scary thing about canada is that long rates are probably set by giant economies so our housing market dying wouldn't cause long rates to go way down. or maybe i'm wrong.

mr baseball's comment was very good, i think suggesting spending patterns probably haven't changed quite as much as media would suggest.... but certainly cell phone service is a big expensive that didn't necessarily exist before. having thought about it though i guess it replaces landline in many cases.

Malls are being dealt a 1-2 punch, first from online shopping, but second - and perhaps just as significant - is people under 25 just not seeing malls as a place to go for any reason. Not to shop, not to hang out - no reason. Check out instagram and snapchat for pictures of the mall - it's unheard of. That hurts for the here and now, but also in the future when these folks have families.

Malls will be like bridge - for ages people played bridge and taught their kids. It was a hobby but also social. Then when videos games and the internet came, people drifted away from bridge. Now you'd be hard pressed to find anyone under age 50 who played bridge for any period of their life. Bridge, for lack of a better, word, died, and so too will malls, for similar reasons.

Speaking of the Toronto housing boom, looks like they are going to try and do what Vancouver did with the 15% tax on foreign buyers?

Not sure how well it has worked out in Vancouver and if people think it will work in Toronto to curb foreign demand.

150k extra for a 1M house is a lot of $. But I guess if you are worth millions and just want to get it out of China then it might just be a $ grab for the gov't.

http://www.cbc.ca/news/canada/toront...list-1.4077474

Yeah, makes sense. To refurbish and even build vertically would still cost a ton but housing perfectly tailored to seniors there sounds like the best idea.

It seems like there should be a way to seamlessly phase the conversion. A mall that knows it going under in a year or 2 sells and the developer begins the transition before the mall closes by beginning repurposing of 1 or 2 large anchor stores that are empty and then continues repurposing as store leases run out, and stores go out of business. The new owner retains an already trained maintenance staff and existing contracts with vendors.

It also seems like there should be some demand for some small businesses wanting to stay in trade for subsidized rent so the new tenants would have shopping options in house. Places like drug stores, hair dresser, old women's clothing boutiques, as well as small foodcourt restaurants which could convert to old people healthy food that's subsidized as part of the senior's meal plan (or however that works in retirement homes).

ETA: You really wouldn't need to expand vertically if you wanted to grow because every shopping mall is surrounded by acres and acres more parking than would be necessary for a retirement home.

Canadian housing never went down during the last recession in 2008 ?

How did they pull that off? How do people afford housing in Vancouver or Toronto? Is it comparable to San Francisco ?

prices didn't go down but volume went way down. so i would say in a real world sense prices did go down. but the credit crisis recovery happened soon enough that the price index never went down.

canada was/is also pretty responsible as per banking and mortgages. so not much sub-prime here either. that really helped.

crazy canadian housing markets are basically vancouver and toronto. most other places have similarity to different usa markets.

vancouver = beautiful city (horrible rain), 30 million rich chinese want to move here. severely land constrained as the city is surrounded by mountains, quasi-ocean. only temperate climate in canada - victoria bc too.... so all kinds of demand to live here but very very little real estate available.... so tons and tons of condo development. real estate prices here seem to go up 10%-15% per year forever.... we sold a house for $300k 30 years ago. $7.5MM today.

toronto = big financial hub city for canada. harder to figure out why its real estate market is so crazy. seen suggestion some prices are up 40%+ in a year or so. that NEVER happened in crazy R/E vancouver.... suspicious that it started when BC did its non-resident real estate tax.. toronto also has lots of recent china immigrants. i use the word china as the immigrants are actually from china, not generally hong kong.. tons and tons of condo's in toronto too.

i hate to keep mentioning so many condo's in toronto/vancouver but it is simply incredible how many there are and how many being built near me...... vancouver also has huge numbers of small old houses torn down and big new house put up. my friend from winnipeg (think canada's wichita or omaha) had never seen that.

TFW you realize your private equity-backed Chinese goods strip mall scam got one-upped by an even ****tier, lower-cost Chinese goods online scam.

i don't disagree, although not sure what you mean exactly.

wal-mart which was king is getting killed by amazon and other big online retailers. also, dollar stores are doing well too. things like marshalls, burlington seems to be doing well.

not sure the strip mall is doing badly.. often anchored by grocery store, pharmacy, dollar store etc....... big malls with lead tenants like sears, macy's, jcp etc. i think are getting killed.

but wal-mart getting everything from china has been usurped by other people getting stuff from china directly/indirectly and cutting out alot of fixed costs and real estate costs.

so you are right......... "made in china" items anyway you slice it and that's not going away - i know one of the most successful china buyers ever and he says you can't contract for 100's of items on one business trip in any country but china.

live shopping still has a place today for a lot of shoppers, just the volumistic traffic and cadence/frequency expectations need to be adjusted. prices and convenience drive consumers to online shopping, but there are still certain items that transactionally flourish with traditional brick and mortar experiences. It used to be that online supplemented B&M retail, but now the inverse is certainly more the norm. This is why you are seeing the advent of pop-up shops becoming a major movement in the retail space. It is cost-effective, creates a larger more time-shortned need and can generate buzz that a permanently open space won't enable.

agree totally....

i see WSJ had a major article on the avalanche of store closings. i am probably confused on stores vs. corporate structure but did The Limited close all their stores? is that what wexner -wexler?- net worth was based on and is that more or less historical relics and the corporations name too.

something that hasn't been mentioned or barely mentioned: has the influx of coffee shops - SBUX and many others - harmed malls as meeting places and/or "something to get out of the house"? also, has SBUX harmed bars/restaurants too? same idea. but i'm thinking the harm is very generic i.e. how people allocate their leisure time as opposed to targetted spending per se.

i think there is not enough analysis as to how people live their lives today vs. years past and how that affects companies.

having lived in really cold parts of canada with very long winters, i can certainly attest to shopping centre treks and just wanting to get out of the house.