A Store Closing That Hurts

Mountain Gear in Spokane is closing.  If you needed technical gear, that was THE place to go.  Now it's gone.  Roskelley and I have had disagreements over a few things, notably the Oregon Episcopal School disaster on Mt. Hood, but we are of one mind here:  The world is about to be a lesser place.

More Vacancies

And once again I am left scratching my head over local real estate management practices.  First, though, a moment of silence for the downtown Baskin-Robbins.  It's closed, and it sports a fatuous sign inviting you to the Sugarhouse location, a wholly useless alternative for anyone downtown.  All that's left for ice cream downtown is chi-chi shops with such high fat content your arteries clog just walking by and inhaling.

Anyway.  Also closed now are all but one of the Firestone service centers in the valley.  Apparently, they couldn't agree on a new master lease.  I imagine Bridgestone (Firestone's parent) was driving a pretty hard bargain, and I imagine the landlord did not want taken advantage of, but now the landlord is stuck with a bunch of vacant properties and no revenue stream to cover the expenses.  Not a good business model.  Apparently Burt Bros. is expanding into a few of them, but don't expect me to darken their door any time soon, given that they borked two of my cars on three separate occasions.

At least the landlord doesn't have to worry about a pile of similar buildings being slapped up in competition.  The hot money is now in multi-family residential.  Man, I would like to be able to follow the tax and accounting tricks that make chronic overbuilding make sense.  There must be something there.  All I know is that we have medium-rise condos and apartments popping up like mushrooms on the Olympic Peninsula.  And don't think they're taking advantage of affordable housing programs.  A $400,000 condo or $2,000/month apartment isn't affordable housing.  Makes you wonder if there are enough people who can afford all this new space.  Probably aren't.  In which case, here comes the next bubble, everyone get ready for a big POP!

Another HR How-Not-To Lesson

I've been focusing largely on real estate lately, so it's time to do a business management entry.  I was called in to provide some advice on this mess just last week.  The company in question has a pool of employees it brings in as needed for a certain type of work.  One employee hadn't been called in for awhile, so he called the company and was told he needed to come in to meet with them.  It then took the two bosses two weeks to get around to meeting with this guy.  At this meeting they took issue with his having missed one of the training days.  They took issue with his level of communication with them.  And they took issue with his actual work product.  Turns out, though, there were some issues with these issues.  I'll lay them out below as lessons.

Lesson One: If you are going to accuse someone of not communicating, you had better have looked at their communications.  The employee had emailed the bosses he would not be available for that training day.  The company's response was that he had responded to the wrong email, so they did not know what he meant by "I am not available the following days."

Lesson Two: If you are going to accuse someone of not asking questions to get clarification, you had better have asked some questions yourself.  The email in Lesson One was actually pretty clear.  The company never followed up on it to ask what the employee meant.  The employee was apparently supposed to figure out on his own that the company was confused.

Lesson Three: Do not treat informal communications away from the office as if they were formal communications made in the office.  The employee and one of the bosses ran into each other at the grocery store.  The employee mentioned in passing that he was going to miss one of the training days.  The boss claimed he told the employee to call the other boss about it.  The employee claimed he never heard any such thing.  The boss never followed up with an email to this effect, either to the employee or to the other boss.

Lesson Four: If you are going to accuse someone of violating a policy, there had better be a policy.  The company claimed the employee had not followed policy concerning communication.  There was no evidence such a policy existed.

Lesson Five: If you are going to accuse someone of shoddy work, you had better not have already signed off on it.  The company claimed some portion of his work was unsatisfactory.  There were in fact some items that had been returned to him for revision (I won't go into the inadequacies of the bosses' notes seeking revisions, but trust me, they weren't good.).  Those revisions had been made, and the company had accepted them.  Now the company wanted to renege on the acceptance as part of disciplining the employee.

So to recap: 1) The company was told the employee would miss the training day, but the company's communications are so pigeonholed that a clear statement sent to the RIGHT PEOPLE will be ignored and not considered to be communication; 2) the company tried to cover its lack of communication by having a boss tell the employee in a grocery store aisle that the employee needed to call, a communication the employee denies receiving and the company has no follow-up verification of having made; 3) there was no policy violation because there is no policy; and 4) work that had been acceptable was retroactively deemed unacceptable to support the current discipline.

And now the killer.

Lesson Six: If you have a problem with an employee's performance, do NOT wait for the employee to contact you to straighten it out (and do not stall for an additional two weeks after that).  Even if everything the company said were true (which it obviously was not), the employee should not have had to sit around wondering what was going on and finally call in on his own.  That is called Passive-Aggressive Management.  If it's your management style, you shouldn't be a manager, and you probably won't be for long.  If you're an owner and pulling these stunts, I guarantee you're driving away all the best people.  Soon your competition will have all the good ones (Maybe that's why Passive-Aggressive Managers congregate in government: no competitors.), and you'll be left with what's left.  And I shouldn't need to tell you where that leads.

Vacancy Rates

Recently saw the Q2 commercial vacancy rates for Salt Lake County, broken down as residential, office, retail, manufacturing, and warehouse.  It looked like a very rosy picture, with low vacancy rates all around.  Personally, I think they smell.  Like mackerel in the moonlight, they shine and stink.  Manufacturing and warehouse are low because they're being converted into the other areas and aren't being replaced.  Multifamily residential is low because people can't afford to buy.  As for office, there are thousands of square feet that are leased but are currently unoccupied (ostensibly because the lessee needs room for expansion, but we'll see how much of that happens) or are being used for on-site storage.  As for the retail numbers, someone is lying.  They pass neither the eyeball test nor the smell test.  Drive around the valley and look at the empty space.  Doesn't matter what kind of retail it is, the vacancy rates are high.  Anybody who thinks otherwise is living in a cave.  It's like just about every other bit of news about our "booming" economy: It only works by being highly selective with the data and then not examining the analysis very much.

Sears Drops the Other Shoe

Didn't have to wait long for this.  As I predicted, Sears is shutting down the Ivy place K-Mart.  Another big dead space in the middle of things.  Retail is truly a mess, and that means that, in spite of all the Class A office space being slapped up to house the 1%'s service industries (law firms, CPAs, investment houses, etc.), the economy is hollowing out.  What to do?  Good question given that we are marching in the exact opposite direction from anything that could solve any of this.  If I were a bright boy at Goldman Sachs, though, I would be creating funding vehicles for redeveloping these parcels.  Into what?  I have no idea.  Caviar shops and Rolls Royce dealerships.  You have to shift the properties to the people who are still buying.  Because what's obvious is that the people these properties were targeting aren't buying anymore.

So How Fragile IS the Economy?

Macy's in Holladay is finally closing.  Congratulations, Holladay, you've finished the job of turning a regional mall into a cow pasture.  For those of you keeping score, Macy's is also closing the Layton Hills store and the stores at the Three Rivers Mall in Kelso and the Everett Mall.  Sixty-eight stores, over 10,000 jobs.  Lowe's is chopping 2,400 full-time employees in effort to cut costs by using more part-time workers, in the further Walmartification of the US job market.  The Limited has filed Chapter 11, but it isn't reorganizing, it's liquidating.  American Apparel is gone, along with its 110 stores.  Albertsons is shutting down stores all over the territory.  Sears is closing the Vernal, Layton, and Tacoma K-Marts and the Alderwood Mall Sears (I'm waiting for the K-Mart next to Ivy Place to go.).  And in local tech news, Endurance International Group, which went public in 2013 and is still trading below the IPO price, is closing its Bluehost business in Orem (I wonder if Governor Available is going to mention that while bragging about all the jobs he's brought in.).

These aren't just lost jobs.  They're a sign that people aren't buying because they can't buy.  And as more people lose their jobs, more people can't buy.  That's called "spinning in."

If Small Business is the Backbone of the Economy...

...the economy is an invertebrate.  I know, I know, small business owners are the scrappy folks who keep it all going.  And most of my clients are small businesses.  And I'm a small business.  But....

Too many small businesses have no clue how things work (as I've noted several times, such as here and here).  And they also tend to be clueless on just how badly the deck is stacked against them (such as our glorious, bad check statute, which I discussed here).  But I am now witnessing Transatlantic delusion.

First, the UK is in the throes of Brexit.  A recent study of small businesses indicates that a plurality exporters and a majority of importers believe Brexit will have no effect on them.  Wow.  Just wow.  Pulling out of a free trade zone and putting a large hole in your financial industry isn't going to leave a dent.  That isn't optimism, that's insanity.  Meanwhile on this side of the pond, small businesses are expecting Trump to stabilize things for them.  Yeah.  Uh, no.  Trump is stirring the pot into a hurricane, and he's doing it for the greater glory of the big boys.  That includes ACA repeal, which frankly was a big win for small businesses.  If that goes, good look offering your employees a benefit package of any kind, let alone one that can match the bigs.  And if you can't attract talent, where are you?  Going dark, that's where.

So keep ignoring reality, small business owners.  It is sort of a requirement for club membership.  Just don't be shocked and whiny if reality doesn't ignore you and bites you in the backside.

It's the Middle Class, Stupid

Or rather the lack of same.  The financial pundits on both sides of the Atlantic are beginning to admit that most people aren't recovering a thing in this recovery.  Given that there no longer is a recognizable economy that can support a middle class, this comes as a surprise only to those who don't actually have to work for a living.  The rest of us see jobs disappearing, businesses going dark, and concerted attacks on the few remaining things that make survival possible (The DC Circuit's recent ruling on the Affordable Care Act is nothing short of criminal, the only way to save affordable healthcare is single-payer, and we need to start removing judges, starting with the Fascist Five on the SCOTUS.), and every time we turn around, those of us in business are expected to work for free (I'm not talking about paying taxes.  I'm talking about doing free work for "marketing" or for "social responsibility."  When our wonderful Bar Association expects me to do pro bono work to help the "image of lawyers," I have to laugh.  I do pro bono constantly, along with a lot of reduced rate work, as well as holding up my end re professional image.  I'd tell them to go talk to the Big Firm people, but since those are the folks who own and operate the Bar....).  No, there's no recovery going on; quite the contrary.

But what are the pundits worried about?  That Democrats and Labour are making noise other than Austro-Chicago orthodoxy (Horrors!).  Janan Ganesh recently took issue with Ed Milliband in the Financial Times because the Labour leader is behaving, well, like a Labour leader instead of Tory Lite.  Ganesh thinks Millibrand should be proposing new ideas, which would be nice, but Ganesh defines "new ideas" as the same old free market fraud his club has been pounding since Maggie installed her throne at No. 10.  Earth to Janan: Your neoliberal dreack has gotten us into this mess, with a growing pool of hopelessness and no security for anyone other than the 1%.

Speaking of Tory Lite, Tony Blair keeps trying to absolve himself of the current mess in the Middle East.  He continues to claim that removing Saddam Hussein did not create the current crisis.  Facially that statement is true, but not in the way Blair tries to claim.  What caused the crisis was putting Saddam (and all the other tin pot, self-medaled dictators around the world) in power in the first place.  We made modernization look like a tool of Western control.  It's no wonder the fundamentalists attracted an entire generation that was fed up to the gills with our meddling.

What else is worrying the pundits?  How about the end of the USD as the world's reserve currency as a result of a conspiracy led by Russia and China and including France?  Please.  While it would be bad if the Yankee dollah were no longer the world's currency, news of its demise is way premature.  There simply isn't anyone in a position to step up and take over.  Not China, not Russia, not the Eurozone.  This is just another pseudo-crisis intended to distract us from the reality of our inequitable, unproductive global economy.

Any other "crises" to distract the masses while they're being led to slaughter?  Is a pig's backside pork?  According to Martin Wolf, Europe will be without gas and oil unless we all march straight in the Ukraine and push Putin back to Moscow.  Martin has apparently never heard the bit of wisdom about never fighting a land war in Asia, especially against the Russians on Russian soil.  He might want to look into how much success others have had with that.

What other lunacy is flying about?  One need look no farther than the ever-reliable Robin Harding, who has never met a Randian delusion he didn't try to have a long-term, intimate relationship with.  His latest shovel-full is that house prices are artificially high because of, wait for it, zoning laws.  I realize that conservatives believe that, in the words of their Blessed St. Ronnie, "Facts are stupid things, " but let us nevertheless put facts before a candid world.  First, housing prices are not artificially high; they're pretty depressed here in the US, albeit over-encumbered by toxic mortgages that the likes of Harding once touted as the next great bit of free market brilliance, and while prices have risen recently in the UK, that was a product of loose money that will soon be going away, so expect a correction on that front soon.  Second, housing zoning these days is focused on affordability: multi-family, townhouses, in-fill.  This shift became necessary if for no other reason than that the old model created an infrastructure that was unsupportable.  Suburban sprawl created too much street, too many miles of utility lines, too much area for fire and police to cover, etc.  That Harding believes zoning still promotes acres of lawns and miles of picket fence has more to do with where he and his friends live than with reality.  Finally, Harding, true to his creed, ignores the 409-kilo gorilla in the room: People can't buy houses regardless of the price because 1%ers he is so stridently defending have created a system in which very few of the 99% have sufficient economic security to enter into a mortgage.

It's the middle class, stupid.  People who work for a living can no longer even hope for stable enough incomes for a house, a new car, and college educations for the kids.  They may be making it this month, but it could all be gone next.  This is what the 1% has pushed us into.  This isn't a recipe for independent, economic actors; it's a recipe for serfdom.

WSJ Says Commercial Sector is AOK

I was sifting through my horrific backlog of reading material and came across this Wall Street Journal article by Peter Grant. He writes that "experts agree everything's fine" in the commercial sector, including malls, hotels, and office space. Some belt-tightening, a bit of a downturn, but no overbuilding, everything will be weathered in short order.

I wonder if the hotel owners who have 40% vacancy rates because of sky-rocketing fuel prices would agree. I wonder if mall owners watching anchor after anchor go dark would agree. As for no overbuilding of office space, maybe not in Manhattan, but take a look everywhere else. Here in Salt Lake City, several new office towers are going in and office blocks are popping up in the suburbs like dandelions, from Ogden to Provo.

Yep, no worries in commercial real estate. If you want to keep believing the Wall Street Journal is an objective news source rather than a cheerleader, good luck with that.