Strip Mall Madness - Why?

[EricL]

While vacationing on the Florida panhandle this month I noticed a tendency they had here to build fancy strip malls.  Sadly, many of them are haphazardly occupied - say about 20-60% of the available space occupied by a business and the rest vacant.  Apparently the solution is to build more strip malls.  This is not a new development. I've been visiting this area for over 10 years and they had the same problem back then. In fact, some strip malls have obviously only been partially occupied for decades.  Nor is this unique to the Florida Panhandle. I've noticed similar trends in the Midwest and California.  Why?

My conjecture is that some wily businessmen approach not terribly observant investors with the idea of building strip malls. Once the malls are built there's some kind of tax write off from people not occupying the business space and recouping the investment.  I'm not in the least bit sure that's true.  It speaks volumes my other conjecture has to do with aliens.  Does anybody here have a real answer?

[BlueMR2]

My conjecture is that some wily businessmen approach not terribly observant investors with the idea of building strip malls. Once the malls are built there's some kind of tax write off from people not occupying the business space and recouping the investment.  I'm not in the least bit sure that's true.  It speaks volumes my other conjecture has to do with aliens.  Does anybody here have a real answer?

I don't get it either.  It's not just a Florida thing.  My area has a TON of small strips.  Way more than the local populace can support.  So, there's good shopping to be had as necessary, yet there's also a lot of abandoned commercial buildings/properties.  The commercial to residential ratio is just plain out of whack.  Yet, there's a upcoming town meeting because some (IMHO insane) developer wants to buy up/take over/tear down several houses, and convert the property to commercial use for his new strip right next to an abandoned strip...  Sigh.

[EricL]

Yep, definitely not just a Florida Panhandle thing.  Like I said I've seen it in the Midwest and California.  I called the local Chamber of Commerce and they didn't know either.  I don't necessarily understand why communities want to exacerbate urban sprawl and ruin the local environment to no great benefit.  But at least they can excuse that if there was a perceived benefit.  But I really don't understand why a contractor would make what appears to be a money pit. 

[vern]

[gooki]

Laundering money through unnecessary construction.

[EricL]

That's what ought to be done and a few are so trashy it looks like they'll fall down on their own.  But the overwhelming majority are brand new or not so new but well maintained.  Many are very upscale.

[EricL]

Laundering money through unnecessary construction.

That seems plausible.  Do you know how the mechanics of that work?   

[Eric]

You could look it up in the dictionary, ala Office Space

[EricL]

You could look it up in the dictionary, ala Office Space

I'm not sure strip mall money laundering has much to do with diverting leftover penny percentages from billions of online banking transactions into separate bank accounts. Or insurance payouts from mysterious business park arson.

I did some Internet research. But the only association with strip malls and money laundering appears to be storefront gambling casinos installed in strip malls. So far I have yet to see any of those.  There are relationships between high end residential real estate and money laundering. The Internet is filled with stories of it by Russians in Miami using high-rise condos. Donald Trump is even mentioned though less for direct involvement than his people skills.  All of that appears to be very high end and unrelated to strip malls so I don't want to Jump to Conclusions.

[gooki]

Laundering money through unnecessary construction.

That seems plausible.  Do you know how the mechanics of that work?

The short and simple

Go in with 5 million dollars, contract the build to be done by a construction company you own, skim 2 million out the other end nice and clean (Through false invoicing, illegal labour charged at full rate, substandard materials). Any future rent received is simply a return on the 3 million invested.

Skimming the 2 million is the relatively easy part. The hard pard is officiating the investment source and any link between the investment company and the construction company.

How it works in Australia
http://www.dailytelegraph.com.au/news/nsw/man-who-blew-whistle-on-how-crime-bosses-are-milking-major-construction-projects-through-links-with-cfmeu-has-had-death-threats/story-fni0cx12-1226812522402?nk=7b3e96b6178b3c98cbb93b73be9019f9

Or it could be as simple as just buying the property with dirty money.
http://therealdeal.com/miami/blog/2013/10/14/dirty-cash-is-fueling-condo-recovery-ex-prosecutor/

There are other methods for laundering money through real estate, you can read more here:
http://www.oecd.org/tax/exchange-of-tax-information/42223621.pdf

[EricL]

Laundering money through unnecessary construction.

That seems plausible.  Do you know how the mechanics of that work?

The short and simple

Go in with 5 million dollars, contract the build to be done by a construction company you own, skim 2 million out the other end nice and clean (Through false invoicing, illegal labour charged at full rate, substandard materials). Any future rent received is simply a return on the 3 million invested.

Skimming the 2 million is the relatively easy part. The hard pard is officiating the investment source and any link between the investment company and the construction company.

How it works in Australia
http://www.dailytelegraph.com.au/news/nsw/man-who-blew-whistle-on-how-crime-bosses-are-milking-major-construction-projects-through-links-with-cfmeu-has-had-death-threats/story-fni0cx12-1226812522402?nk=7b3e96b6178b3c98cbb93b73be9019f9

Or it could be as simple as just buying the property with dirty money.
http://therealdeal.com/miami/blog/2013/10/14/dirty-cash-is-fueling-condo-recovery-ex-prosecutor/

There are other methods for laundering money through real estate, you can read more here:
http://www.oecd.org/tax/exchange-of-tax-information/42223621.pdf

Thank you!  It may not sound like much, but it was getting on my nerves.  I don't care for crime but if we're going to have it it should be at least organized.  Damn, it's good to be a gangsta.  But if I go that route I prefer the Superman trick.  It's still a little confusing because there really aren't any rental profits with such low occupancy to offset maintenance, insurance, and taxes.  But I'm sure there's a workaround for all that.

[gooki]

If it's not organised crime doing it, it's property developers scamming out of town investors.

[EricL]

If it's not organised crime doing it, it's property developers scamming out of town investors.

Based on my readings, there are so many Russkies in Miami it's not impossible for Putin to try and annex it as Crimea west.  No shortage of them on the panhandle either.  It's possible the locals are interested in local investing. The recovery seems to be finally creeping into this end if the deep South based on the recent spring break.  But even a cursory examination shows store front supply radically exceeds demand.