The Coming Collapse Of Commercial Real Estate Is Already Here

The U.S. consumer may be on the mend as we head further into 2011, but the same story of resurgence does not apply to many of the U.S. big-box retailers.

From Wal-Mart to Sears to Target to Best Buy, if you look at what is happening in the retail space, "it looks pretty scary," says retail expert Howard Davidowitz.

Wal-Mart -- the world’s largest retailer – has seen six consecutive quarters of negative same-store sales and is now looking to put the majority of its investment capital towards emerging markets.

In the case of Target and Best Buy, they both recently missed major key earnings expectations. Making matters worse, Best Buy “tanked” even without the competition from the now defunct Circuit City, Davidowitz points out.

Tale of Two Stores

There is a sea change happening in retail, Davidowitz tells Aaron in the accompanying clip. Consumers are spending more now than during anytime in the last three years, but they are choosing to spend more and more online than in brick-and-mortar stores.

Companies like Apple, Amazon, Netflix are doing gangbuster business while the aforementioned struggle to keep pace. Why go to the store – be it record store, book store or movie rental store – when you can buy all you need right from the comfort of your own home and have it delivered to your front door or digital media device?

The Walls Are Collapsing

A coming collapse in commercial real estate has been looming for the last couple years, but Davidowitz thinks it has already begun. “I think there has [already] been a partial collapse in the commercial real estate business,” he says pointing to the rising number of community bank failures. “I think retail real estate developers better start rethinking the use of their space.”

There are always exceptions to the rule, but his resounding advice is to stick to commodities and stay away from the retail space, at least for now.

This post originally appeared on Tech Ticker.

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