Thursday, April 16, 2009

General Growth Properties Files for Bankruptcy

This is pretty big news, and the story is across many levels - consumer spending, commercial real estate, mortgages, etc:

General Growth Properties, one of the largest mall operators in the nation, filed for bankruptcy early Thursday morning in one of the biggest commercial real estate collapses in United States history.

Despite bargaining for months with its creditors, General Growth faced increasing pressure to handle its more than $25 billion in debt, largely in the form of short-term mortgages that will come due by next year. The company has been severely wounded by the recession, which has wreaked havoc upon the retailers who inhabit its more than 200 malls in 44 states. Many stores have shuttered, depriving mall operators like General Growth of revenue.

What fascinates me going forward is what is going to happen to all these eventually abandoned properties. There is so much over capacity in America, so many millions (!) of extra square feet of retail space, that realistically there may never be a need for it. Especially as more and more people shop on-line. The closings/bankruptcies of retailers and whole malls will drive even more people to turn to the web (when consumption picks up). There is such a mess to unwind, it may be the story for the next several generations.