Wednesday, October 04, 2006

Mr. Bubble

You may be wondering where I'm standing on the real estate bubble. I started saying two years ago (Look in the archives if you don't believe me.) that the market was going down hard, and it has (All you "soft landing" types can go on living in your fairyland. There will be that much more for the rest of us to salvage.). Everyone is on the bandwagon now, so I'll just let The Motley Fool summarize.

The New Downtown is Here, the New Downtown is Here

OK, not yet.

After endless hemming and hawing, The Brethren unveiled their vision for downtown SLC yesterday. For details, visit the website. Who wins and who loses? In its simplest form, the losers are the ones who have to be downtown for the next five years, and the winners are anyone who survives. A close examination shows that things are a bit more complex than that.

First, let's get my biggest beef out of the way. Why tear down the old First Security Building? People, it's a landmark, and it should be treated as such. Check that; Utah desecrates landmarks as fast as it finds them. Let's just say the building should be kept around. It certainly looks better than the post-modern monstrosity that will replace it. It certainly can't be in worse shape than two newer piles of putrescence that are being left in place, the Eagle Gate and Beneficial Life Towers. And if that piece of Bowwowhaus bilge Ken Garff has moved into qualifies as historic, then anything right down to my doghouse qualifies. Oh well.

Losers. Definitely the small businesses downtown. There will be no anchors left, and traffic and parking will be bollocksed. They'll have to survive on lunch and special events traffic. People who work downtown will be stuck too. If you think the Convention Center and Kennecott/Zions Bank projects made a mess, you ain't seen nuthin' yet. Another big loser will be locally owned business. This is a Taubman project, and Taubman operates under the local=bad equation. I'll give you any odds that Taubman considers itself to have already met local ownership quotas for the entire project by promising space to Utah Woolen Mills, Deseret Book, Mr. Mac, and Mrs. Fields. Anybody else had better forget about having space at the table.

Winners. Downtown residential space. Two blocs of residential units planned already with perhaps more to come, along with parks, conversion of streets to walkways, and a Harman's Grocery Store would go a long way toward making downtown a place that can be lived in. Any downtown merchant who survives will win for two reasons: foot traffic will go way up, and rents will go down. Which leads me to my final group of big winners, downtown tenants 2011-2020. Tenant raiding is already rampant, and once this project goes through, it will be a blood sport, with both retail and office space grossly overbuilt. Anyone with a war chest right now will make a killing in a few years.