Documenting The Atrocities

Calculated Risk has a summary of the most recent commercial real estate news, and the reports are staggering. Some examples:

Malls: From Bloomberg: Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent the previous quarter and 7.7 percent a year ago ...

Offices: Office Vacancy Rate Rises to 15.2% in Q1 and the WSJ: Companies Sold Office Space at a Fast Pace

The office vacancy rate nationwide rose to 15.2% from 14.5% in the previous quarter, and likely will surpass 19.3% over the next year, according to Reis ...

Apartments: From Reuters: US apartment market worsens with economy--Reis

The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...

Hotels: From HotelNewsNow.com: STR reports U.S. data for week ending 28 March

In year-over-year measurements, the industry’s occupancy fell 12.3 percent to end the week at 56.6 percent...

And it gets worse from there. Malls, office parks, hotels and apartment buildings are basically losing money on each vacancy and cannot raise rents or rates to make up for the falling revenue, or they of course risk losing more customers and tenants due to the widespread number of vacancies they have. If anything, they have to cut rates or rents, as it's the only thing they can do, and if one does it, they all have to follow suit to remain competitive.

But you can only cut rates or rent so much, otherwise the entire mall, office park, hotel or apartment building starts losing money as a whole, and as these close to relieve the pressure on vacancies, the tenants that are able to pay find themselves without a place to live or stay or do business. That kind of interruption only increases the odds that the business owner will leave the mall or office park and go out of business, or not stay at the hotel in that city, or get tossed out on the streets instead of moving to the new locations with vacancies.

That damages the economy as a whole, causing less people to spend money at the mall, or not to expand into the office park, or not to take that vacation and stay at the hotel, or not to want to move and get tied into a long-term lease in this economy, causing more vacancies...

And voila! Yet Another Death Spiral.

We've got a long, long way to go. Keep that in mind when you see CNBC telling us that a major rebound and sustained economic recovery is just a few months away.

“People have been talking about an L-shaped recession,” adds Miichael Mussa, senior fellow at the Peterson Institute for International Economics. “The record shows you come back sharply from deep recessions” like the current one.

These economists and others see a V-shaped pattern, similar to that of the recession-recovery periods of the 1970s and 1980s. And they say there is ample evidence to support it.

Among the reasons for the new optimism: a significant easing of the credit crunch, improvement in consumer spending—including better auto sales—a potential bottom in housing, a less-grim jobs picture and expectations that the government's massive stimulus spending could start boosting economic growth almost immediately.

That doesn’t mean anyone is saying the recession is over yet. But the end is closer than people think.

Sure it is. Just like a year ago when we had a strong economy and the subprime mess was nothing to worry about. CNBC was soooooo right then. Wells Fargo really did earn $3 billion this quarter and the Dow's on its way to 14,000 again.

Go right on telling yourselves that everything's fine now too.