“Commercial real estate is in trouble,” Katy O’Donnell wrote in Politico earlier this month, “and turbulence in the $15 trillion market is threatening to bleed over into the broader financial system just as the U.S. struggles to emerge from a recession.” She continues:
The longer the pandemic paralyzes hotels, retailers and office buildings, the more difficult it is for property owners to meet their mortgage payments—raising the specter of widespread downgrades, defaults and eventual foreclosures. As companies like J.C. Penney, Neiman Marcus and Pier 1 file for bankruptcy, retail properties are losing major tenants with no clear plan to replace them, while hotels are running below 50 percent occupancy.
The United States was way overbuilt before the pandemic decimated brick-and-mortar retail. The U.S. has about 23.5 square feet of retail space per capita, more than five times as much as the U.K. (4.6 square feet per capita), Japan (4.4), The Netherlands (4.1), and France (3.8). (Note: Other sources actually have that figure much higher, and our friend Josh McCarty of Urban3 showed back in 2017 that if we consolidated all U.S. retail space and its parking, it would be visible from space.) We’ve been propping up large-scale retail (malls, strip malls, and big-box stores) for years. But now those supports are crumbling, and it’s not hard to imagine this sector collapsing—with devastating direct impacts and ripple effects throughout the economy.
That’s the topic on this week’s episode of Upzoned, with host Abby Kinney, an urban planner in Kansas City, and regular cohost Strong Towns president Chuck Marohn. Abby and Chuck discuss the past—why malls and big-box stores were perfectly adapted to the suburban development pattern—as well as the future, including the possibility that existing big-box stores may become distribution centers for delivery and drive-through services. They also talk about why conventional retail space is so difficult to revive, and which types of retail are more likely to survive than others.
Then in the Downzone, Chuck recommends The Structure of Political Positions, by Blake Pagenkopf. (Blake will be Chuck’s guest on the November 9th episode of the Strong Towns podcast.) And Abby talks about getting ready for winter, including gearing up for cold weather biking.
Additional Show Notes“The next economic crisis: Empty retail space,” by Katy O’Donnell
Abby Kinney (Twitter)
Charles Marohn (Twitter)
Gould Evans Studio for City Design
Theme Music by Kemet the Phantom (Soundcloud)
Further reading from Strong Towns on retail and commercial real estate
“What Comes Next for Commercial Real Estate,” by Charles Marohn
“Want more local businesses in your neighborhood? Then legalize ‘Accessory Commercial Units.’” by Ashley Salvador
“Here's how much of America is occupied by big box stores.”
“The Real Reason Your Local Mall Is Failing,” by Charles Marohn
Big Box Stores: America’s Rigged Game for Retail (free ebook)
Amazon vs. Malls: What Does it Mean for Local Economies?
Meat Suit Cities: Reconciling Aesthetics with Progress
Housing is About Capital Flow, and Always Has Been
Has Infrastructure Become the "Ultimate Partisan Battleground"?
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How People-Centered Is Toronto's "People-Centered" Vision?
"If you have a property in the city, you should not leave it empty."
How a Small California Town is Charting Its Own Course to Energy Resilience
How Christchurch, New Zealand became a lesson in how NOT to rebuild after a disaster
When (If Ever) Should States Preempt Cities?
A Game-Changer for Economic Development in Arizona
Does Increasing Available Housing Cause Gentrification?
What Can We Hope For from a Mayor Pete D.O.T.?
Parking's "Free Ride" Is a Financial Disaster for Cities
Public Housing and the Housing Crisis
The Problem with Creating “Slow Streets” Too Fast
"Will Cities Survive 2020?"
For Teens, No Room in the Pandemic City
Will Wyoming Have to Start "Abandoning" Its Small Towns?
COVID-19 and the Boom in Multigenerational Housing
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