I wrote an article titled AVAILABLE 15 months ago about the increasing number of Space Available signs in my supposedly upscale Montgomery County, PA.

We supposedly have the same number of people employed today as we did in the fourth quarter of 2007. This is 7 million more than were employed in late 2010.

If this is a real economic recovery, why is there still 68.2 million square feet less occupied office space than there was in 2007? Could it be because the shit jobs added during the Obama “recovery” aren’t well paying office jobs, but crappy retail, fast food, and “self employment” jobs?

My suspicions are confirmed by the chart below. The space available has grown by 120.7 million square feet since 2007, and continues to grow. Can you believe developers continue to build new office space, when this much is available? Can you believe office rent prices have risen by 7.2% since 2010? How can this be?

Look no further than your friends at the Federal Reserve. Zero interest rates allow bankrupt developers to pretend they are solvent. The Fed has allowed banks to “restructure” developer loans, pretending they will eventually make their interest and principle payment with the rent they are pretending to receive from phantom tenants. The extremely low interest rates has resulted in the mal-investment of funds into building more office space. Easy money and accounting fraud can do wonders, for awhile. There is no recovery. There are no new tenants. The space available signs continue to proliferate. How long can negative cash flow be sustained by developers as businesses shut down, while retailers and restaurants go dark?

And now for the really bad news. REIS is a property company skewing the data as positive as possible. Those charts are only for the 79 largest metropolitan areas in the country. And they are only for Class A buildings. If you were to include Class B and Class C buildings in all the markets in the U.S. you would find the true vacancy rate to be in excess of 30%.

As you drive around your neck of the woods, play a little game. Count the number of Space Available signs along your route and calculate whether the true vacancy rate is closer to 17% or 30%.

Extend and Pretend is coming to an End.

11 thoughts on “SPACE STILL AVAILABLE”

  1. Where I’m at, every yard of concrete, every excavator, surveyor, electrician, plumber…. you name it, is so busy they won’t return calls – they’re booked until it freezes. Every one of these paper tigers is gonna learn the hard way the true meaning of ‘the hardest part of riding a tiger is getting off’.

    In the mean time, an otherwise sleepy little drinking town with a farming problem is absolutely white hot and no where to go but down when the music stops.

    1. “When somebody has too much debt and cannot reimburse it, how do you bail him out? Obviously by restructuring his debts, which imply losses for his creditors.

      But when one lends him more money in order for him to pay back what he owes, he is not bailing him out but rather pushing him in a bigger hole! The game until now has been to “print” more money and to add more debt on the shoulders on the indebted ones, to gain some time in the hope that growth will resume and reduce de facto the weight of the existing debt burden and the additional new debt issued to support the initial debt troubles.

      This is a big misunderstanding of debt dynamics and its effects on the economy. When debt becomes too big, which it is now the case in many parts of Europe, the servicing drains all the available cash flows and reduces the growth potential.”


  2. Admin,
    Very timely, Though here in Burlington where I work there has been a recent frenzy of office building swapping/purchases by the large commercial RE companies and they are building a huge new office building off the end of Mall Road where I-Robot was headquartered. They moved up the street to a larger newer building on route 3. This frenzy of recent building I suspect cannot continue at this pace. As I do my daily walk through certain retail plazas I am noticing more and more small retailers going belly up, even a Dunki’n Donuts recently down the street, meanwhile they are building a huge Tuscany Restaurant just up the street, very strange. Please note the local economy is heavily subsidized by the Lahey Clinic and its various subsidiary businesses.

    It will be interesting to see what will become of this recent spate of new buildings when the next downturn hits in full force. MA economy likes to think of itself as diverse and insulated, what few around here fail to see is how interconnected our economy is with the state and federal largesse, with the proliferation of schools, hospitals, defense department suppliers and high tech companies. If there is a major hick-up on the free flow of money from the government, this house of cards will collapse at a withering pace. Until then people seem to think things will continue on as usual and cannot see anything else.


  3. It is getting worse slowly in St Louis area. Now I am waiting for it to get worse suddenly. The Quinn Retail Space Indicator is saying no economic rebound anytime soon.

  4. They are just finishing a brand new development not far from my place that includes a new Target store and about half a dozen or more smaller retail spaces. After years of new retail space sitting empty, it seems that the developers must have slashed their rents far enough to entice old, established businesses to leave their older spaces and move to the new ones. Space available signs have been everywhere for years but they are now predominantly in older spaces.

    I live on the south side of our town which has historically been more affluent and still is. For over 100 years there has only been two smallish shopping areas on the south side but now there are a dozen! People in our city do not come to the south side to shop. As a matter of fact most people never come here unless they live here or visit friends. One reason is the lack of shopping and the other is the street system which twists and winds all over the damn place. If you are not familiar with it you can easily get lost. To give you some idea of the mindset of the soon to be out of business, new business owners…….One new place sells only imported Italian pottery. Another looks like some kind of franchise called Nothing Bundt Cakes that specializes in bundt cakes. Five guys burgers just closed up shop and a freaking mattress store moved in. There are several mattress manufacturers in our area and a dozen mattress stores within 3 miles of this one. The only kind of store we have up here is the only Traders Joes in the city. It was built in one of the older, smallish shopping areas and the developer kicked out several old established businesses to make room for some newer, upscale stores right across from Trader Joes. I can only assume he counted on Trader joes to bring in kore traffic so he jacked up the rents. There was a huge flurry of activity for awhile but the new stores are now empty.

  5. Various entities involved are all engaged in a mass game of musical chairs, willing to participate due to various levels of risk. The game will continue to play out until the music stops suddenly, when we will then be bombarded with calls of “Who could’ve seen this coming?”

    Central Bank – No risk of loss, they control the money supply and the interest rates, i.e. both the “music” and the “chairs.”

    Banks – Very little risk. They charge interest on the free money they receive to sell the space. They can pass on the risk to other dupes via MBS’s and probably through other scams we don’t even know about yet. They will be bailed out when the music stops.

    Construction Companies – Low Risk. They only have to bet that the music keeps going long enough to finish the next project (usually less than a year.) They will be bitten when it stops but have all kinds of lawyer-scum and lobbyist-spawn to help them in troubled times.

    Big Retailers – Medium Risk. They benefit from brand new construction but still depend on foot traffic to drive business. The traffic depends on the music not stopping and the facade of normalcy in general. Seeing the writing on the wall, the “golden parachute” system is instituted to insulate the company brass from the endgame.

    Employees/Consumers – High Risk. They largely live paycheck to paycheck, spending any excess in a vain attempt to pacify their base urges and emulate their music video idols. Controlled by their programmers, they will do nothing to insulate themselves from the hard times ahead. Their quality of life will plummet as soon as the music stops. Bailouts for them will be largely rhetorical and any assistance given will be minimal only to the extent needed to pacify rioting and encourage voting for the next dear leader.

    Small Retailers – Very High Risk. Screwed on every front. They are left with the undesirable locations as the big boys follow the free money to the best locations and newest buildings. They are being strangled by environmental and healthcare regulations and said strangling will only get worse. They do not have armies of lawyers, accountants, and lobbyists to insulate themselves from the effects of a downturn. They will receive no bail-out. When the music stops, they will be forced into bankruptcy and their credit will largely be destroyed.

    The further you are from the source of the free money, the more tenuous your position and the worse you will suffer. What really is concerning are the people near the bottom who don’t even realize how hard they are about to get hit.

  6. Trekked to mid-state over the past two-days. In my 100 mile, one way, trip I saw two separate ICE traffic stops, lots of orange barrels but few actually active construction sites, another closed down small, yet important, business (a gravel/landscape wholesaler, tell me again about the housing recovery?!?), more dark homes with stickers, more trash, more people running around in shorts (so not working), but less spending money and more of my small-biz-that-caters-to-consumers friends beginning to freak out as their sales fail to materialize in our economy, but their costs to do business explode. Oh yeah, one more closed small-retail shop too and many, many, car dealers with more inventory than I have ever seen. Lots of boats, campers, and gas-hogs for sale too.

    This is in a very rural area, yet no one can pinpoint why it is happening as they run to their politicians demanding more laws, more fines, more minimums, more protection, more free shit and more wars.

    The illegals are just the cherry on the fucking cake of eliminating our middle class.

    We, the middle, have been declared a blight on the earth by the elite. The elite are actively marketing this idea to the growing number of struggling masses worldwide.

    The amount of space available has nowhere to go but up. Now is the final chance to do something to avert the coming horror when the few remaining middle wealth-producers crash and freaking burn.

    Or not. Most of those same businesses that will find themselves sacrificed for the higher ideals of the elite and the jealous, are doubling down and declaring that things are going to get better and this world we live in will never, ever, change for the worse. Peak energy is just an oft-repeated meme, as is peak population, peak chemical, hell, peak water and technology.

    Cognitive dissonance is everywhere, apparently contagious, and deeply, truly, ingrained.

    So it freaking goes, so it goes…

  7. West Texas is blowing and going. Good times are here. Been in the oil patch all my life. The end is coming.

  8. As long as there is ZIRP and very low cost money is floating around the foolish building frenzy will continue, one day, however, Humpty Dumpty will fall. John


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