Dennis Norman Musings

By: Dennis Norman

When I left off in part one I had spent nearly 2 hours traversing through Chesterfield Mall but came up empty handed..I never did find the writing journal I was looking for.  As I walked back to my car I couldn’t help but wonder why people would choose to shop at a mall.  After-all, thanks to the Internet and Google, you can quickly and easily find practically anything you may want to buy on the Internet.  Granted, the Internet has it’s shortcomings too….you do need to be cautious about who you are buying from and some large or heavy items may be cost prohibitive to buy due to shipping costs, but for an awful lot of things it works great.  As I continued to think about all the online purchases I have made over the past couple of years and the very few rare visits I have made to retail stores and malls I couldn’t help wonder if, assuming I’m not the only one with these shopping habits, is the mall going to go the way of the dinosaur? 

As I got in my car I thought about all the times over the years I have talked friends and others out of investing in commercial real estate deals (including malls and shopping centers) instead favoring investment in residential real estate.  I did not do this because I have anything against commercial real estate it was just for many people with little or no investing experience I feel houses are a safer bet.  After-all while we have seen price fluctuations lately, including lower values, residential real estate is historically a safe investment.  Even if you were unfortunate enough to buy property at the height of the market only to see the value drop later if you have patience and can hold on for a while time will probably fix the problem and the values will rise again in the future.  This is not necessarily true with regard to some commercial real estate deals including shopping centers and malls. 

A mall can become obscolescent as a result of changing buying habits of consumers, functionality or design, changing demographics of the neighborhoods surrounding it, or a decline of the location and increase in crime rate of the area.  Unfortunately once a mall or shopping center reaches this point the value has been impacted to the point that most likely the only value left is the ground value.  If the reason for the failure or decline of the mall is related to changes in the neighborhood surrounding it or increased crime, then the ground value is probably minimal.  For examples of what I am talking about you can check out deadmalls.com a site dedicated to failing or failed malls throughout the country.  More to follow in part 3.