You think home mortgages are the end of the real estate problem! Think again. Because, here comes The Big One: commercial mortgages.
Your average big kitchen, 3 1/2 baths, 4 bedrooms, and an entertainment room with a big screen on the wall HOME pales next to a gigantic mall, an industrial/office park, skyscraper commercial building. Commercial real estate has too many vacancies; too many empty store fronts; too much dreary space. In a commercial office building, one person needs only a computer to do the job that multiple people needed more room to do. Technology and equipment replaced the person. Fewer people. Fewer people needed. Production with more efficient machinery requires fewer people. Charlie Chaplin in Modern Times, flat on his back with his little wrench in hand going down the conveyor belt, just doesn’t exist in today’s highly specialized, technologically advanced, precision production world.
Towns shoved the shoppers to the mall when they put in parking meters. First they put in parking meters, then they came up with meter maids, then they slammed the shopper with Parking Tickets. Time Expired. You’re Late. How are you supposed to have a romantic dinner when you have to run down 2 blocks to get to the car to feed the meter because you couldn’t find a spot 1 block away, and then it starts to rain. What are you supposed to do: it cost more to park the car than have the appetizer. And what if service is slow? And the sirloin is cold. So the towns have empty stores because they have the parking meters. And those stores are basically small stores, but the rents are high. Okay, so the customer comes into the small store with the high rent and because its a small store the inventory is kept low, they pack the perishables light. The customer asks for something because they don’t see it and the proprietor says either ”its under your nose” or “we can have that for you in 2 weeks by putting in a special order for you, you lovely customer”. Well, the customer becomes irate: what do you mean you don’t have it. And off they go to the mall.
Now every time you read about retailing, they always say in the article that the Christmas season is when retailers do the bulk of their business. They can’t use the word Christmas anymore because it’s politically incorrect. And they have to pay rent for all the other months in the year when they are losing money, just waiting for the Christmas season to arrive so that they can make money. And they pay rent to the mall owners. And if things are bad, they can’t afford to pay the high rents. And many times the deal they negotiated is with escalating rents; as the years move along the rents grow higher. The figuring is that as they improve and expand their businesses, they’ll attract more customers, they’ll make more sales, they’ll earn more money, and then they’ll be able to pay a higher rent. Well now, in this economy, there needs to be room to negotiate.
Did I mention that people work inside the retail establishment? Lots of people. And they like their jobs. That’s how they earn money for their families. That’s how they buy cars and clothes and food and books and pretty things and useful things and keep the economy moving and the economists happy to see the velocity of money at high speed.
And it cost a fortune to put together the money to build the mall. There’s debt and loans outstanding; and that’s where the problem is. How are you going to pay the debt? How are you going to pay off the loans? Who’s going to bail you out?
The amount of space for commercial enterprises is huge. Shopping, purchasing, and acquiring today has also become technologically advanced. The Internet. You can shop for your groceries on the Internet. Maybe the store will deliver; maybe you’ll go to pick up the stuff. (Which brings me to a good one with the stupid markets: environmentally-friendly reusable shopping bags. At first you would see people returning to the stupid market with their bags, but then it becomes cumbersome. You arrive at the stupid market to do your shopping, you put your environmentally friendly reusable shopping bags in your wagon, you load up your wagon, you go to check out, you unload your wagon BUT your bags are under your groceries, you get them out last, they need your stupid market card to scan by the register, they need your credit/debit card to run through the machine, they need the key to void an item, so that by the time you hand them your environmentally-friendly reusable shopping bags, they’ve got everything already packed. You better just move along before the ice cream melts.) A lot of people are using the Internet to do their local shopping. They’re using the Internet to buy mattresses. Years ago they would go to the mattress store, mattress department in the department store, lay down on each and every mattress. Like Goldilocks, this one is too hard, this one is too soft, this one is just right. Then they would buy it at the point of sale. Not nowadays, because of the Internet, they know what they want to buy – and on the internet they can shop around for the best price. They do that with many purchases. Why should the store owner make his inventory available to these shoppers. He’s wasting his time trying to make the sale. He’s telling them everything they want to know; giving them all the information; answering all their questions. And then they go to the internet to make the sale. How is the retailer to exist?
In this economy, where we know things are bad, where we feel it personally, where we see it all around us, how is the proprietor to exist? The Internet has taken over the business. The Internet is where there is the point of purchase. It’s a whole new world. Modern Times, a 1936 movie, directed by Charlie Chaplin, starring Charlie Chaplin described what people faced in the economy of their day. Technology replaced the physical doing of the work and became a new way of production. America adapted to all changes in the economy. Today the Internet is the dominant force. WE THE PEOPLE of AMERICA will adapt to this new economy as well. It will take time. With a lot of misery to endure. Give credit to Ben Bernanke, Chairman of the Federal Reserve. He said that IF the banking system gets a good footing, stabilizes for a comeback, IF the financial systems can find their way back, then we can come through this economic turmoil and be on the road to recovery in this calendar year. I’m betting on Big Ben. He wrote the BOOK on the Great Depression. And he knows what he’s talking about.