Recession may change retail landscape across America

DEER VALLEY — While cautioning that the current economic woes will last at least a couple of "ugly" years before there's a recovery, the leader of Zions Bancorp.'s wealth-management arm said Thursday that the longterm ramifications of the downturn will "reshape the topography" of American retail.

George Feiger, chief executive officer of Contango Capital Advisors Inc., said Americans, strapped with credit troubles and struggling to repay debt, will consume less in the future. As a result, the country will need 10 percent to 15 percent less retail space, such as strip malls and department stores, and a corresponding decrease in the number of retail employees, warehouses and delivery and support systems.

"If you take this in, all of the sudden you'll realize, apart from its other ramifications, the whole landscape of America you've driven through to get here — the shopping malls, the department stores, the restaurants — all of this was essentially based on credit, on consumer credit, being able to consume 70 percent of GDP instead of 60 percent of GDP," he said to a crowd of about 70 at the eighth annual Directors & Officers Training Conference, a two-day conference that continues Friday.

"Just like there weren't many shopping malls in 1980, there won't be again. This is a serious point. Physically alone, we're going to have to reshape the topography of America, just like we reshaped it the way it is now between 1980 and the present."

Feiger attributed current troubles to "the biggest borrowing binge in U.S. history" and "a staggering explosion of debt."

"There are going to be a couple of ugly years coming as a result of this, notwithstanding that someone has discovered that we've been in a recession for a while," he said. "2009 is a write-off year for all practical purposes, and depending the industry you're in and the place you're in, 2010 is not going to be all that much better."

Tightening credit for businesses and households will be one problem. "No one is extending consumers more credit," Feiger said. Eroding capital means banks cannot lend more, higher loan standards mean banks will not lend more, and non-bank credit generating entities are either financially crippled or paralyzed with fear, he said.

"Essentially, every kind of company is facing tougher credit conditions than ever before. So what are they doing? They're canceling projects, they're laying off people, and then the recession spirals down," he said. "If you haven't got a job, you can't consume, so the restaurant you went to doesn't have you as a customer."

Problems are even spreading to commercial real estate, he said. "The tightening credit standards and all the rest of this are a vise around every part of our economy," he said.

However, he foresees great investment opportunities in the future and "extraordinary bargains" now, especially in bonds and loans, with credit markets ultimately rebounding and employment, construction, retail, consumer durables and municipal finances beginning to "repair" in 2010 and 2011.

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