WEBVTT - Bloomberg Surveillance: Can Malls Claw Their Way Out?

0:00:01.440 --> 0:00:05.000
<v Speaker 1>Global business news twenty four hours a day. Asked Bloomberg

0:00:05.080 --> 0:00:08.080
<v Speaker 1>dot com, the radio plus Bobble Lab and on your radio,

0:00:08.480 --> 0:00:12.160
<v Speaker 1>this is a Bloomberg Business flash and I'm Karen Moscow.

0:00:12.200 --> 0:00:14.960
<v Speaker 1>And the Bloomberg Futures report is runty. You buy Interactive

0:00:14.960 --> 0:00:18.079
<v Speaker 1>Brokers and CME Group. If you're looking for global futures

0:00:18.120 --> 0:00:21.639
<v Speaker 1>contracts with low trading costs, look no further. Interactive Brokers

0:00:21.680 --> 0:00:23.599
<v Speaker 1>is the industry leader. Learn more at I v k

0:00:23.840 --> 0:00:27.160
<v Speaker 1>R dot com slash CME Futures. US docks are a

0:00:27.200 --> 0:00:30.320
<v Speaker 1>little changed following your report at the US economy expanded

0:00:30.320 --> 0:00:32.680
<v Speaker 1>at the slowest pace in three years. We checked the

0:00:32.680 --> 0:00:35.760
<v Speaker 1>markets every fifteen minutes throughout the trading day on bloomberg

0:00:36.159 --> 0:00:38.440
<v Speaker 1>S and P futures up a point down features of

0:00:38.479 --> 0:00:41.480
<v Speaker 1>twenty two, Nasdaq futures down two and a half. Tax

0:00:41.520 --> 0:00:44.680
<v Speaker 1>in Germany little changed ten, Your Treasury down six thirty seconds,

0:00:44.720 --> 0:00:47.560
<v Speaker 1>held two point three one percent. Nin Max screwed oil

0:00:47.640 --> 0:00:50.440
<v Speaker 1>up one percent or forty six cents to forty four

0:00:50.479 --> 0:00:53.320
<v Speaker 1>a barrel. Comex School little changed, up forty cents to

0:00:53.360 --> 0:00:56.640
<v Speaker 1>twelve sixty six thirty announced the euro dollar oh nine

0:00:56.640 --> 0:00:59.840
<v Speaker 1>one to the en one eleven point five seven. Chevro

0:01:00.040 --> 0:01:03.880
<v Speaker 1>now performing analysts estimates as searching crude oil prices dumptail

0:01:03.960 --> 0:01:06.440
<v Speaker 1>with cost cuts to push profit to a three year high.

0:01:06.640 --> 0:01:10.119
<v Speaker 1>Ex On Mobile also beat. And that's a Bloomberg business flash.

0:01:10.160 --> 0:01:12.720
<v Speaker 1>Toma David hearing things so much, David Gurr in Washington.

0:01:12.760 --> 0:01:15.319
<v Speaker 1>I'm Tom Keenan New York. This is a treat we

0:01:15.360 --> 0:01:18.400
<v Speaker 1>could literally go. It's like Howard Divinovan's, but calmer and

0:01:18.440 --> 0:01:21.959
<v Speaker 1>more professional. Think of Howard Divinovo's at Harvard Business School.

0:01:22.120 --> 0:01:24.920
<v Speaker 1>And that's sort of where you get Byron carlac is

0:01:24.959 --> 0:01:27.319
<v Speaker 1>with us with p w C. Price Water. I'm sorry,

0:01:27.480 --> 0:01:31.640
<v Speaker 1>it's Price Waterhouse Cooper's because that old t W seen

0:01:32.120 --> 0:01:35.560
<v Speaker 1>in Byron has a Texas accent. That's what you do

0:01:35.680 --> 0:01:38.679
<v Speaker 1>when you work with Tramwell Crow for a million years.

0:01:39.120 --> 0:01:41.600
<v Speaker 1>I go to your old website and there are no

0:01:41.800 --> 0:01:46.120
<v Speaker 1>males on that website. Even Crow Holdings is like almost

0:01:46.160 --> 0:01:51.320
<v Speaker 1>embarrassed about malls. Are malls dead? You know? It's interesting.

0:01:51.360 --> 0:01:54.240
<v Speaker 1>I don't think they are dead, but they're changing relevance.

0:01:54.560 --> 0:01:56.360
<v Speaker 1>And so when you think about what's happening, there's a

0:01:56.440 --> 0:01:59.480
<v Speaker 1>huge disruption in the middle. And there this comment that

0:01:59.520 --> 0:02:03.880
<v Speaker 1>we keep caring. Mediocrity in the middle is dead. Experiences

0:02:03.880 --> 0:02:08.000
<v Speaker 1>are actually pretty exciting. There's a lot going on in

0:02:08.200 --> 0:02:10.840
<v Speaker 1>some of the better malls, and they're grading themselves A,

0:02:10.960 --> 0:02:13.200
<v Speaker 1>B and C. The A malls are doing quite well,

0:02:13.600 --> 0:02:17.840
<v Speaker 1>but everything is being disrupted by e commerce and relevance.

0:02:18.080 --> 0:02:21.400
<v Speaker 1>Do they get bulldozed? The seam walls, the B malls

0:02:21.440 --> 0:02:25.600
<v Speaker 1>get bulldozed. What becomes of those photos that we see

0:02:25.960 --> 0:02:28.560
<v Speaker 1>in every article about the death of your world. Well,

0:02:28.560 --> 0:02:31.400
<v Speaker 1>in real estate, it's called adaptive reuse. And once you

0:02:31.440 --> 0:02:35.960
<v Speaker 1>see a developer take control of a site again, excuse me,

0:02:36.200 --> 0:02:42.440
<v Speaker 1>adaptive reuses what we do with a coffee continue. So

0:02:42.600 --> 0:02:45.320
<v Speaker 1>imagine that one anchor at one end being torn down

0:02:45.400 --> 0:02:49.880
<v Speaker 1>and released to someone else, or becoming an apartment building

0:02:49.960 --> 0:02:53.120
<v Speaker 1>or a hotel. If you think about when those malls

0:02:53.160 --> 0:02:56.360
<v Speaker 1>were built, generally many of them were built because traffic

0:02:56.400 --> 0:02:59.200
<v Speaker 1>counts were high in the location was good, and so

0:02:59.360 --> 0:03:03.640
<v Speaker 1>you have great sites that can be redeveloped or repurposed.

0:03:04.240 --> 0:03:07.520
<v Speaker 1>But the bottom line is we're over retailed in America

0:03:07.840 --> 0:03:12.000
<v Speaker 1>twenty four feet per person twenty four gross rentabal square

0:03:12.040 --> 0:03:15.359
<v Speaker 1>feet per person, more than double any other industrialized country

0:03:15.360 --> 0:03:19.400
<v Speaker 1>in the world, and more than double any other con Yes, yes,

0:03:19.440 --> 0:03:22.639
<v Speaker 1>I believe the next country is eleven square feet per person.

0:03:23.040 --> 0:03:25.760
<v Speaker 1>He's looking at you, David, jump in here because Byron

0:03:25.840 --> 0:03:29.200
<v Speaker 1>is looking at his numbers from BWC. Byron I was

0:03:29.240 --> 0:03:30.800
<v Speaker 1>at I was at a wedding a couple of weekends

0:03:30.800 --> 0:03:33.440
<v Speaker 1>back outside of Washy should have fifty miles outside of town,

0:03:33.520 --> 0:03:35.040
<v Speaker 1>and we were. We were in what I think you

0:03:35.040 --> 0:03:38.920
<v Speaker 1>could call them all. It felt like a created village. However,

0:03:38.960 --> 0:03:40.880
<v Speaker 1>the notion of them all has changed, hasn't it what

0:03:40.920 --> 0:03:42.600
<v Speaker 1>you what you'd find there and what it looks like,

0:03:42.720 --> 0:03:45.200
<v Speaker 1>it really has. I mean, think about the different uses

0:03:45.240 --> 0:03:46.960
<v Speaker 1>you see in them all today compared to what you

0:03:47.000 --> 0:03:50.960
<v Speaker 1>did even five years ago. Where automotive companies are using

0:03:50.960 --> 0:03:54.720
<v Speaker 1>them as showrooms. You see health, wellness and fitness taking

0:03:54.760 --> 0:03:59.080
<v Speaker 1>the place of traditional apparel retailers. Uh. You see landlords

0:03:59.160 --> 0:04:04.640
<v Speaker 1>introducing new concepts that inspire visitation with families and children.

0:04:05.440 --> 0:04:10.600
<v Speaker 1>You see that um health health uses taking space in

0:04:11.640 --> 0:04:16.920
<v Speaker 1>retail configurations, and so yes, the the uses are changing

0:04:17.400 --> 0:04:21.360
<v Speaker 1>to become more relevant to the demographics. When you look

0:04:21.400 --> 0:04:24.920
<v Speaker 1>ahead a year, five years, what's the what's the role

0:04:24.960 --> 0:04:27.440
<v Speaker 1>of a brick and mortar retail establishment going to be

0:04:27.520 --> 0:04:30.000
<v Speaker 1>what's gonna, what's gonna, what's gonna compel me to go

0:04:30.080 --> 0:04:33.240
<v Speaker 1>to that place? Well, so remember you know nine of

0:04:33.279 --> 0:04:37.280
<v Speaker 1>sales are still done in brick and mortar uh situations.

0:04:37.800 --> 0:04:41.599
<v Speaker 1>So e commerce is growing at twenty a year, but

0:04:42.880 --> 0:04:45.760
<v Speaker 1>it still represents only eight and a half to eleven.

0:04:46.240 --> 0:04:48.400
<v Speaker 1>You guys always go to the revenue line down the

0:04:48.440 --> 0:04:51.839
<v Speaker 1>income statement and given mall, as David was mentioning, it

0:04:51.920 --> 0:04:55.040
<v Speaker 1>had given mall, where's the profit? Is it in the food,

0:04:55.240 --> 0:04:58.440
<v Speaker 1>is it in clothes? Or is there just no profit? Well,

0:04:58.480 --> 0:05:02.240
<v Speaker 1>so the branded, the igh end branded retailers still pay

0:05:02.320 --> 0:05:07.120
<v Speaker 1>the highest rents. Rents in many mall settings this year

0:05:07.160 --> 0:05:12.360
<v Speaker 1>were flat to down two. So the rental strength, the

0:05:12.400 --> 0:05:15.800
<v Speaker 1>ability for landlords to control the rents in many retails

0:05:15.839 --> 0:05:21.880
<v Speaker 1>situations has changed to their detriment. However, the relevance of

0:05:21.880 --> 0:05:25.880
<v Speaker 1>brick and mortar is still very important to the retail

0:05:26.160 --> 0:05:30.279
<v Speaker 1>shopping experience. Based on how much is still done in

0:05:30.320 --> 0:05:34.160
<v Speaker 1>brick and mortar environments. Out of these out of these

0:05:34.160 --> 0:05:36.680
<v Speaker 1>businesses set themselves apart. You broke in most recent note,

0:05:36.680 --> 0:05:39.240
<v Speaker 1>there's no room for mediocrity. Well, what's the chief thing

0:05:39.279 --> 0:05:41.479
<v Speaker 1>that that a retailer has to do it. At this point,

0:05:42.160 --> 0:05:46.160
<v Speaker 1>we believe it's the experience if the product can't differentiate itself.

0:05:46.200 --> 0:05:48.880
<v Speaker 1>And there are there are designers that are really trying

0:05:48.920 --> 0:05:51.560
<v Speaker 1>to add whimsy and reason to come try on their

0:05:51.600 --> 0:05:55.560
<v Speaker 1>new Spring lines. For example this Spring, whether it's a

0:05:55.600 --> 0:05:58.520
<v Speaker 1>pop up shop that's selling hats for the Derby or Easter,

0:05:59.200 --> 0:06:01.400
<v Speaker 1>or a store that treats you like a guest in

0:06:01.440 --> 0:06:05.159
<v Speaker 1>a hospitality experience that makes your experience that much better

0:06:05.680 --> 0:06:07.880
<v Speaker 1>than sitting in front of your computer. I think it's

0:06:07.920 --> 0:06:11.320
<v Speaker 1>driven by product on one end and experience on the other.

0:06:11.360 --> 0:06:13.320
<v Speaker 1>Can I go to the French elections? Now? We got

0:06:13.320 --> 0:06:16.160
<v Speaker 1>to do that. Here's a here's a factory, folks fare

0:06:17.240 --> 0:06:20.280
<v Speaker 1>right now. There are thirteen thousand, three hundred tons of

0:06:20.320 --> 0:06:24.359
<v Speaker 1>steel in the Mall America. That's two Eiffel Towers. The

0:06:24.440 --> 0:06:27.480
<v Speaker 1>Mall of American Minnesota is like the mother of all malls.

0:06:27.800 --> 0:06:32.839
<v Speaker 1>What's its future? That's a great question for that for that,

0:06:32.880 --> 0:06:36.400
<v Speaker 1>not for that particular mall especially, you wonder can they

0:06:36.480 --> 0:06:39.960
<v Speaker 1>keep the experience relevant so when it opened and really

0:06:41.360 --> 0:06:44.600
<v Speaker 1>still people go to Minneapolis for mall vacations, for that

0:06:44.640 --> 0:06:49.440
<v Speaker 1>particular vacation. But inside. Can they keep it relevant with

0:06:49.520 --> 0:06:52.520
<v Speaker 1>the rides of the family experiences, the hospitality experience in

0:06:52.560 --> 0:06:56.520
<v Speaker 1>the hotels. It has to be worth that visitation, and

0:06:56.560 --> 0:06:59.360
<v Speaker 1>the question is can the landlord keep it relevant in

0:06:59.360 --> 0:07:01.760
<v Speaker 1>that regard. We would like to have you back again

0:07:02.320 --> 0:07:05.480
<v Speaker 1>to do a longer treatment. This is really the Amazon

0:07:05.560 --> 0:07:08.719
<v Speaker 1>and the death of bricks and mortars topic one for

0:07:08.800 --> 0:07:11.800
<v Speaker 1>so many people. Byron Carlac with US with p WC

0:07:11.920 --> 0:07:14.920
<v Speaker 1>their US real estate practice as well this morning, and

0:07:14.960 --> 0:07:17.040
<v Speaker 1>folks point from the emails that David and I get

0:07:17.120 --> 0:07:20.840
<v Speaker 1>this is just extraordinary interest is of course, David, you

0:07:20.840 --> 0:07:24.360
<v Speaker 1>could shop near our Washington studios. I tweeted this out

0:07:24.400 --> 0:07:29.240
<v Speaker 1>looking out at your favorite clothing blocks away. I hope

0:07:29.240 --> 0:07:32.760
<v Speaker 1>you dark in the door and went for the little

0:07:34.240 --> 0:07:38.680
<v Speaker 1>I'll give you the key, David Guray in Washington. I'm

0:07:38.720 --> 0:07:41.560
<v Speaker 1>Tom keenan New York stay with US Worldwide Coast to coast.

0:07:41.960 --> 0:07:47.360
<v Speaker 1>This is Bloomberg coming up here on bloomberghre Valance of

0:07:47.400 --> 0:07:49.920
<v Speaker 1>conversation about fixed income with the Fixed Income ce IO

0:07:50.000 --> 0:07:52.680
<v Speaker 1>at Franklin Templeton. That's Chris Blamphy. That's coming up here

0:07:52.800 --> 0:07:56.440
<v Speaker 1>on Bloomberg. Surveillance from Bloomberg Radio David Day in Washington Today,

0:07:56.440 --> 0:07:58.160
<v Speaker 1>Tom Keane in New York