From: saslpo@stevens.unx.sas.com (Len Olszewski)
Subject: Re: Mall of America
Originator: saslpo@stevens.unx.sas.com
Date: Wed, 19 Aug 1992 13:42:49 GMT
Organization: SAS Institute Inc.


In article <1992Aug19.124201.164357@dstos3.dsto.gov.au>, mjp@itd.dsto.gov.au writes:
|>

          [material about stores deleted]

|> Also abutting the Rundle mall is the Myer Centre which is a
|> 4 or 5 story complex done up in pseudo old world look.
|> This complex has been an economic disaster, being partially
|> responsible for the 2.3billion $A debt of our state bank.
|>
|> They should have been able to predict this given that the
|> myer centre in brisbane was up and running and losing money
|> before this one was built.
|>

It's interesting that economic viability doesn't figure into the 
decision to construct ambitious commercial projects in the heart of 
expensive downtown properties. It seems that this is very much a 
situation of perceptions; if one group of investors thinks an area has 
"profit potential" and manages to get the financing to undertake a large 
commercial project, often other groups do so at an increasingly frenetic 
pace. With any regional economic downturn or flattening of growth, this
leaves empty office space inventories, and declining urban land values.
"Build it and they will come" doesn't always work outside of the silver
screen.

Cheap capital has a lot to do with encouraging this sort of thing. 
Comparatively cheap investment to value ratios across national borders 
also spurs this sort of activity (like favorable monetary exchange 
rates, or comparatively cheap land prices abroad relative to domestic 
prices, and so forth).

The response of planning agencies with which I've been familiar has been 
to encourage the development if it falls within the parameters of their 
plans without regard to whether the project has a shred of economic 
credibility. In defense of the planning agencies, if private money can't 
predict success, limited govenrment resources, with a completely 
different emphasis than enterprise profitiability, certainly *should* 
have a more difficult time. Yet I've *never* seen the issue of economic 
viability or potential formally enter into the approval process or
discussion.  Everyone assumes that if the private money thinks it will
succeed, well, that's good enough for us.

This rapid development of commerical projects happened about 6 years ago 
in downtown Denver Colorado, right before the price of oil dropped and 
the region entered a prolonged energy-related economic bust (a bust that 
carried me and my family here to North Carolina). I'm curious if there 
are any planning covenants or procedures anywhere that explicitly, 
formally and exhaustively look at potential profitability in assessing 
the desirability of proposed commercial developments - anybody know of 
any? Although I'm out of planning now, we don't seem to have any 
locally. And we are in a period of regional counter-recessionary growth, 
so we've gotten a bunch of new malls, new office buildings, and so 
forth, since capital is pretty cheap these days.
<-------------------------------^------------------------------------->
|  Len Olszewski                | "You can observe a lot by watching."|
|  Technical Writer             |                                     |
|  saslpo@unx.sas.com           |                                     |
| "Have cursor, will curse."    |    - Yogi Berra                     |
|---------------------------------------------------------------------|
| Opinions this ludicrous are mine. Reasonable opinions will cost you.|
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