This is an important issue. CNNMoney reports on The dead mall problem:

As the recession leaves more retail casualties in its wake, rising store bankruptcies and mall closures could have devastating economic consequences.

As more stores exit malls, vacancies in regional malls could rise past 7% by year-end, a level not hit since the first quarter of 2001, according to real estate research firm Reis.

Major cities across America will be affected, said David Birnbrey, Chairman and co-CEO of Atlanta-based The Shopping Center Group, a retail real estate services firm.

Both Birnbrey and Susan Wachter, professor with University of Pennsylvania’s Wharton Real Estate Department, warn the social and economic impact of empty stores can be devastating.

“One of the biggest consequences [of store and mall closings] is the loss of a sense of community,” Birnbrey said. “I am a big believer that malls are an essential part of Americana. A mall is a place where people gather and socialize.”

Wow, what a load of crap. If that is one of the biggest consequences, we’d have nothing to fear. However, there are serious consequences. As noted later in the article, malls have been critical to the tax base of many localities (accounting for 50% of tax revenue in some places). The lost tax revenue is going to be hard to replace. The jobs provided by retailers are difficult to replace. Some of my skepticism of government spending projects has to do with underestimating how many retail employees are unemployable in other sectors (and I will concede that retraining programs and boosting community college funding might help bridge that gap). Our economy has become so dependent on consumer spending and the extension of credit to support it that no short term solution can work. Left alone, the economy will naturally shift away from being so focused on consumer spending. Of course, that process would be painful for the many unskilled unemployed left in the wake. That’s currently politically unacceptable. The government solution is to hope that enough government spending will provide a sufficient boost that we can get back to where we were two years ago. Unfortunately, reinvesting for the long term seems to be off the table.

There have been a series of high profile retail bankruptcies. Steve and Barry’s was the fastest growing retail chain (I never actually saw one) before they collapsed and revealed that they were a ponzi scheme. Linens and Things, Sharper Image, KB Toys, and Circuit City have all declared bankruptcy. Though they obviously weren’t the best run businesses, they weren’t scams. Some of these were “anchor” stores. People came to a shopping center to visit a Linens and Things, and went next door to the small boutique because it was convenient. When the anchor dies, so too do many of the surrounding stores. Commercial Real Estate is going to be a terrible investment in the near future.

For some of these people, there won’t be other job opportunities. I know a PhD student in neurobiology who works at the local Sports Authority. I’m guessing that she’ll find part time employment in a different industry. I’m also guessing that she’s in the minority.