SODOM & GOMORRAH: We often think that economic bubbles are complex, distant phenomena that effect primarily stock prices, financial instruments, and whose primary effect is job loss. We often overlook some of the other effects that stare us square in the face as we do our Christmas shopping.
Depending on where you live, shopping centers are sometimes taken for granted. They seem to randomly pop up, are of appropriate size (or inappropriate if you live down the street from one) and centralize the stores people most frequent in one general area. However, there is some science to their existence and placement.
The International Council of Shopping Centers (ICSC) is an industrial organization founded in 1957 with the aim of educating people on shopping center development, advocating on behalf of members in issues of public policy, and developing international standards for shopping centers. Based a lot, at least from what I can tell, on central place theory, the ICSC has come up with some basic definitions for different types of shopping centers. In a nutshell, the larger the center, the larger the trade area is – with a few caveats.
If we were to loosely define a bubble as a period of quick economic growth that consisted of mis-allocating capital, we may expect to see some bending of the guidelines for shopping centers. Housing, as we know, was expanding so quickly that everyone assumed that there would be more people living in an area than there actually would be.
In 2007, several cities in California and Arizona began enacting legislation to limit store sizes. Presumably this was done under some notion to “protect small business.” However, the frequency of the legislation hints that retailers were in a buying mood in 2007, allocating capital for larger and larger stores. Galt, CA has a population of a little over 23,000 people and according to Wikipedia is bordered entirely by unincorporated areas of San Joaquin and Sacramento county. While cities such as San Diego, and Santa Clara have larger market areas, Galt and Stockton don’t seem to be able to support huge retailers.
A further examination of the central valley retail market reveals other disparities. Stockton, CA (291,000 pop.) has two indoor shopping malls. Modesto, CA (201,000 pop.) has one. Tracy, CA (82,000 pop.) has one.
The mall in Modesto has four anchors.
The mall in Tracy has three anchors with space for a fourth. The Modesto and Stockton malls all have indoor walking space at a width of 30 feet, while Tracy has width at 45 feet.
In other words, this one region has four super regional malls. The local counties have unemployment rates around 14 to 16 percent. Bubble anyone?