Bankruptcy of Borders darkens ‘recovery’ story
by Rick Ackerman
Posted originally February 17, 2011
EVERY TIME WE READ OR HEAR ABOUT THE SUPPOSED ECONOMIC recovery, or about how the Fed has raised its “growth” target for the next quarter, we are reminded that the nation’s retail sector — like its real estate sector — remains an absolute, unmitigated, Katie-bar-the-door disaster. Yesterday it got even worse when Borders Group declared bankruptcy. This is bad news for those who love books, of course, since the firm’s megastores, which average about 25,000 square feet in size, are a great place to browse.
But it is even worse news for mall operators who count Borders as a major tenant. In the Boulder, Colorado, area where we live, there were three giant Borders stores until a few years ago, when one in the heart of the city’s shopping district closed. The space has remained vacant ever since, a drain on the owner — but also a huge dead zone on a street where retailers are struggling to survive.
The bankruptcy will force the closing of a second megastore located at 29th Street Mall. That will be quite a blow to the developer, Maserich, since they’ve been dealing with a few other large vacancies and the closure of several large restaurants. The Borders store there occupies two big floors on the mall’s most heavily trafficked corner, and we cannot imagine another tenant big enough to fill the space. Even if such a tenant existed, they would probably be able to find cheaper space at a soon-to-be-vacant building nearby that currently houses Ultimate Electronics, a big-box chain store that also declared bankruptcy this month.
The third Borders store in the immediate area is located in the Flatiron Mall in Broomfield, about a mile from our home and eight miles from Boulder. Although there has been no announcement yet concerning whether it will close, there is no reason to think this won’t happen eventually. While companies often emerge from bankruptcy with renewed health and vigor, it’s hard to see this happening to Borders, which, like Barnes & Noble and every other purveyor of books, is fighting for its life in competition with Amazon and digital publishers.
Flatiron Mall has so far survived the loss of some big tenants, including Lord & Taylor, Hold Everything, Restoration Hardware and, most recently, Abercrombie. However, a post-Christmas exodus created even more holes, including three food-court drop-outs: McDonald’s, Richie’s Neighborhood Pizza and Panda. But Borders’ space is going to be the toughest new hole to fill if it goes dark, since the store occupies a two-story building in an outdoor section of the mall called “The Village” that has already lost two-thirds of its original tenants.
The Scary Thing Is…
What’s scariest about all of this is that the local economy is probably among the strongest in the U.S. Home prices in my suburban neighborhood are firm – only slightly off peak-levels achieved two years ago. If the malls in this area are losing tenants in droves, then it must surely be worse in many regions of the country.
And that’s why we are always dumbfounded when we see Rupert Murdoch’s recovery story du jour on the front page of the Wall Street Journal. Whom does he think he’s fooling? Certainly not the news anchors. In case you haven’t noticed, they continue to refer to the economy as “troubled” even as The Guvvamint’s Ministry of Economic Propaganda spews “recovery” statistics that are an affront to every American struggling to stay afloat. Supposedly, and for better or worse, a little more than two-thirds of the nation’s GDP comes from consumption.
If the retail sector is dying, as anyone can see it is, how can there be this steady stream of news about a recovery. Maybe there’s been a spurious recovery on Wall Street, courtesy of its deep-pocketed benefactor, the Federal Reserve, but no one we know views the good fortune of bankers, IPO scammers and other highly compensated paper-pushers as remotely reflecting a genuine, broad-based economic recovery.
Written by aurick
17/02/2011 at 11:56 pm
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