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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (1285)	10/24/2018 12:23:57 PM
From: Elroy Jetson	Respond to of 13803

It's a fact of life that many essential retail businesses pay lower rent per square foot which bring customers to the area upon which small businesses paying higher rents depend. Grocery stores and restaurants pay much lower rent per square foot than do boutique shops selling cookies, yogurt shakes or T-shirts for tourists. But businesses like grocery stores and restaurants is the primary reason people go someplace. In the late 1980s I used to provide valuations of retail malls for ERISA reviews, and a major anchor tenant like a grocery or a department store typically paid $30 per square foot annually while a kiosk selling cookies or coffee paid $500 per square foot. It would be tempting to maximize the mix of cookies and coffee, but no one goes to a mall where they only sell cookies and coffee - but they might buy a coffee or cookie if they're already there to get a haircut, eat at a restaurant or watch a movie. Westwood Village adjacent to UCLA went through this unfortunate cycle 25 years ago depressing commercial and residential real estate prices locally in the process. In an irrational rent-maximizing move Westwood village became an area selling only T-shirts and costly snacks without restaurants, grocery stores or other businesses selling essentials. The end result was the creation of a retail desert which no one, not even tourists, had any reason to visit. So even the T-shirt and boutique snack shops went out of business. Yet none of the landlords were willing to face the fact that their rents were too high, so Westwood Village adjacent to a major university remained vacant for years. Eventually some of the landlords lost their properties and the rest seeing a similar catastrophe wised up and Westwood Village again became a normal mix of businesses which offered affordable rents for businesses which bring in traffic. But it was a slow and incomplete comeback, because people living in the area had become accustomed to patronizing retail businesses just south and west of Westwood Village. Even today that "village" is a shadow of its former self. We sometimes drive by Westwood Village on the way to dinner at a restaurant located a little to the south of Westwood Village. But I haven't been there to shop for 25 years.