Les Jones

Too Much of Everything: Hotels

Saturday, August 15th, 2009 | Economics | Permalink | No Comments |

Wall Street Journal - Hotels Deliver Some ‘Jingle Mail’ :

‘Jingle mail” isn’t just for homeowners anymore. From San Diego to Dearborn, Mich., an increasing number of hotel owners in the U.S. market are simply walking away from money-losing properties and forfeiting them to lenders.

The rise in hotel forfeitures is the product of the worst hotel market since the early 1990s, with revenue declining by double-digit percentages. That has pushed the value of many hotels to less than the balance on their mortgages. Just like homeowners who mail their house keys back to the bank — so-called jingle mail — hotel owners see no hope in renegotiating their loans.

Via CalculatedRisk.

Previously -  Too Much of Everything: Strip Mall Space

Tags: too much of everything

Too Much of Everything: Strip Mall Space

Tuesday, August 11th, 2009 | Economics | Permalink | No Comments |

CalculatedRisk - Reis: Strip Mall Vacancy Rate Hits 10%, Highest Since 1992:

“Right now it looks like all signs are pointing to rents and vacancies, big components of income, getting shot down,” [Victor Calanog, director of research for Reis] Inc said. “Until we see stabilization and recovery take root in both consumer spending and business spending and hiring, we do not foresee a recovery in the retail sector until late 2012 at the earliest.”

I see vacancies in strip malls everywhere. In recent construction some spaces aren’t vacant because the last tenant moved out; they’re vacant because the first tenant has never moved in.

Previously - Too Much of Everything: Bank Branches

Tags: too much of everything

Too Much of Everything: Bank Branches

Thursday, August 6th, 2009 | Economics | Permalink | No Comments |

Wall Street Journal - BofA Plans to Cut 10% of Branches:

Bank of America Corp. Chief Executive Kenneth Lewis told investors last week he is planning to shrink the company’s 6,100-branch network by about 10%, a pullback from the two-decade expansion that took the bank from coast to coast.

Banks were on a wild building spree the last two decades, opening branches everywhere to attract customers seeking loans. Now they’re pulling back. I just found out that our bank (First Tennessee) has closed the branch nearest to our house.

Previously - Too much of everything: Restaurants and Post Offices

Tags: too much of everything

Too much of everything: Restaurants and Post Offices

Tuesday, August 4th, 2009 | Economics | Permalink | 1 Comment |

The other day I wrote: “It will take years to run through the current real estate glut. We could quit building now and not need to build another house, condo, strip mall, office building, restaurant, bank branch, vacation home, hotel, or car dealership for years, possibly even a decade.”

Here’s more evidence to support that conclusion.

Restaurants: 22nd Consecutive Month of Traffic Declines in June:

The restaurant industry’s economic challenges continued to persist in June, as the National Restaurant Association’s comprehensive index of restaurant activity declined for the second consecutive month. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 97.8 in June, down 0.5 percent from May and its 20th consecutive month below 100.

Restaurant operators also reported negative customer traffic levels in June, marking the 22nd consecutive month of traffic declines.

CRE Report: U.S. Postal Service Might Consolidate up to 14 million Square Feet

[T]he USPS could be studying the consolidation of more than 14 million square feet of retail/office/industrial space across the country. To put that in perspective, 14 million square feet would be the equivalent of about all of the vacant retail space in a market such as Boston or Cleveland or Denver or the Inland Empire or Tampa.
…
In May, the U.S. Government Accountability Office (GAO) issued a report en titled “U.S. Postal Service - Network Rightsizing Needed to Help Keep USPS Financially Viable.” The GAO study criticized the USPS for failing to take the necessary steps to remain viable, such as “rightsizing its retail and mail processing networks by consolidating operations and closing unnecessary facilities,” and “reducing the size of its workforce.”

Previously - Too Much of Everything: Condominiums

Tags: too much of everything

Too Much of Everything: Condominiums

Sunday, August 2nd, 2009 | Economics | Permalink | 2 Comments |

1 is very lonely number for New Jersey family that is the sole tenant of Florida highrise:

FORT MYERS, Fla. (AP) — The Vangelakos’ southwest Florida condominium has marble floors, a large pool overlooking a river and modern furnishings that speak of affluence and luxury. What they don’t have in the 32-story building is a single neighbor.

The New Jersey family of five purchased their unit four years ago, when Fort Myers was in the midst of a housing boom and any hints of an impending financial crisis were buried in lofty dreams of expansion and development. They made a $10,000 down payment and eagerly watched as builders transformed an empty lot into an opulent high rise, one that now symbolizes the foreclosure crisis.

“The future was going to be southwest Florida,” said Victor Vangelakos, 45, a fire captain who planned to eventually retire and live permanently in the condo.

Most of the other tenants in the 200-unit condo didn’t close on their contracts, and the few that did have transferred to an adjacent building owned by the same company because more people live there.

If you’re thinking “Woo hoo! They’ve got the whole place to themselves,” think again. As sole owners they would also be responsible for all maintenance costs and taxes for a 32 story building. That’s one of the counterparty risks of condominium ownership. Maintenance fees and taxes are divided by the number of owners. If there’s a falloff in ownership everyone’s fees increase.

Previously - Too much of everything

Tags: mortgage mess, too much of everything

Too much of everything

Wednesday, July 29th, 2009 | Economics | Permalink | 1 Comment |

The guys at Zero Hedge have put together a report on the state of the economy and why we’re not going to go back to the good old days next month or next year: “The End of the End of the Recession”. Daily Kos has a useful summary. You can download the whole 75 page slide presentation here. (Don’t let the page count put you off. It’s very skimmable and quite a bit of it is charts.)

One theme you’ll see here is one I’ve seen in many places. The past decades of excess have left us with too much of everything. Too many malls, too much office space, too many hotel rooms. Too many houses - many of them too big for the new frugality. Too many cars - many of them too big when fuel prices spike.

It will take years to run through the current real estate glut. We could quit building now and not need to build another house, condo, strip mall, office building, restaurant, bank branch, vacation home, hotel, or car dealership for years, possibly even a decade

Tags: mortage mess, too much of everything