This is a Market?

I commented recently about how the real estate market seems to be perpetually warped.  Investment money is supposed to pursue a return, preferably the best one available, but what we in fact have is money being frantically thrown at one bubble after another, twisting supply and demand into unrecognizable states and consequently twisting the market into something that isn't really a market, at least not one of any use, unless by "use" you mean "running serial con games."

Real estate is not unique in this.  Look at gas prices.  Historically, gas prices come down after Memorial Day.  This year, they've come down a ton.  And they've done so in the face of a major piece of news: tensions between the US and Iran that could shut down the Strait of Hormuz.  If markets were actually functioning, oil speculators would take this news and jump into the spot and futures markets with both feet, driving prices up Memorial Day be hanged.  But that isn't happening.  And even stranger, no one is commenting on this.  I'm left singing Led Zeppelin, "And it makes me wonder."

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!

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.