Funding on America's Dying Shopping Malls Have Been Drying Up! Singapore's Shopping Mall Woes Escalate!

With retailers under pressure,  the Bloomberg reported that funding strains on America's dying malls have been escalating. [bold added]

Street estimates that several hundred malls could shut down over the next decade, with properties reliant on Macy’s, JC Penney and Sears at the most risk. Sales at department stores, once the engines that powered shopping centers across the U.S., have declined almost 20 percent since 2006, according to the firm. About 800 department stores would need to shut down to restore balance between sales and profitability, Green Street said in an April report...

Insurance companies and banks that are eager to issue loans on high-end shopping complexes aren’t as willing to take a chance on a shaky mall. That pushes borrowers toward Wall Street firms that underwrite loans to sell to investors as CMBS.

CMBS lending, which stalled earlier this year with the volatility in global markets, remains subdued in the face of new regulations taking effect in December. Wall Street banks have sold about $18.5 billion of CMBS deals this year, a 30 percent drop from the same period in 2015, according to Deutsche Bank AG. That’s making borrowing more expensive and choking off funding just as loans from the boom years of 2006 and 2007 come due.

“You’re definitely seeing some problems as the loans reach their maturity,” said Roger Lehman, a debt analyst at Credit Suisse Group AG.

Walking away from a poorly performing mall is often the best thing a landlord can do for its balance sheet, according to Green Street’s Busch. If the debt is greater than the value of the property, it might not make sense to invest in a costly redevelopment, he said...

Default risk emerges...

Late payments are creeping upward on CMBS loans backed by all property types. More than $1 billion of mortgages tied to shopping malls, office buildings and hotels soured in May, up from $884 million in April, Wells Fargo & Co. data show.

That figure will probably increase as more loans issued in the run-up to the 2008 crash fail to refinance under the tougher underwriting guidelines in place today, according to Rich Moore, an analyst with RBC Capital Markets.

America’s dying shopping mall experience should highlight on the lessons of malinvestments as manifested by debt financed excess capacity.

And for those whom have come to believe that an artificial credit inflated boom premised on a race to build supply will bring about perpetual prosperity is bound to end up with a reality check--a rude awakening.

Updated to add: shopping mall overcapacity has also been spreading through Asia.

This May 2016 Bloomberg article explains why Singapore's shopping malls are in danger:

Empty storefronts in Singapore’s prime shopping district may become a more common sight.

Vacancies in the city’s main Orchard Road area, a magnet for tourists lured by malls and Japanese department stores such as Takashimaya, have risen to a five-year high and across the island, they’ve soared to the highest since 2009. As economies around the region struggle with sluggish growth and consumers rein in spending, property brokers are expecting more retailers to scale back and close shop. And while rents have slumped from a peak in 2014, they haven’t fallen nearly enough to convince some brands to stay.

One of the main reasons, excess capacity!