Retail in the US - towards destructive destruction

[Spekulatius]

Interesting report, pulled from the Q4 2019 reddit hedge fund letter vintage:

https://www.eulerhermes.com/content/dam/onemarketing/euh/eulerhermes_com/erd/publications/pdf/20200122theviewretail.pdf

[Gregmal]

Good read. Thanks for posting.

 

I agree the shift isn't over, however I think this move has been happening in slow motion(with an acceleration in 17-18) long enough, that most competent operators are able to integrate working trends while running off, non working ones. Any landlord with a major department store, by now, should have an idea whats going to be done with that space. You'd have to think, although Im always surprised by management incompetency, that the department store C-suite guys, know which stores are on borrowed time, and have a map for following through there as well.

 

This is not to say that the pain is over. I just think the picture is starting to get clearer. E-commerce cant operate, profitless, forever. Further there is not really a reason to think that the malls of yesterday, dont eventually end up resembling Amazon.com. Instead Sears, maybe you have Paramus Park Mall Home and Garden Utility Center, a venture consisting of multiple different vendors all just looking to have their products on the shelf, no different than what you get virtually at Amazon. Co-working space for retailers.

 

I have also begun looking at and analyzing price per sq ft for retail vs residential in many different areas. Of course, this ignores the capex required to develop, but if Tesla can raise capital to infinity without a real plan, you'd think a company looking to build out state of the art residential facilities in a top MSA can certainly find a few hundred million somewhere. Somewhere down the line it may be a favorable flip if you can swap out retail locations generating $5-$50 per square ft in revenue with residential space demanding $150-200 a square ft. I already think with many of the top location malls, that the concept has been proven. Mini cities if you will, no different than even on a short term basis how some casinos and airports are setup.