ALERT: Newgate Mall Malaise and Looming Job Losses

ALERT: Newgate Mall Malaise and Looming Job Losses

There is trouble brewing among Utah’s retailers and telemarketing businesses.  Recent headlines indicate that some of Weber County’s long standing companies have found themselves on the rocks.  This week Convergys corporation announced closure of its Ogden facility in May.  The facility employs about 300 people in the telemarketing industry.  Most of the rest of Convergys centers in Utah will be closing as well.  Why would the centers be closing?  The cost of labor in Utah cannot compete with other parts of the world.  With telephony technology being so affordable, it is just as easy to open a call center in Bangladesh as it is in New York.  The major difference of course is the cost of labor.  So, telemarketing is being shipped to emerging economies.




In other news, Sears corporation announced that it may not be in business much longer.  It is bleeding $2 Billion a year and its lifelines are running out.  Their plight dovetails with retailers everywhere that are hemorrhaging (just ask Dillards).  For businesses that need to make payroll and pay rent (especially in malls) diminishing sales makes for an eminent apocalypse.




So what is the real estate angle to all of this?  Except for management and technical staff, the telemarketing jobs represent entry level positions that employ renters and potential first time home buyers.  Weber County’s economy, with unemployment rates near 4%, should easily absorb these folks as they look for more work.  There is plenty of opportunity out there.  But, the hiccup in income may pose some transitory problems for them and their landlords.


On the Sears side of things, their demise would mean the departure of a major anchor of the Newgate Mall.  General Growth Properties recently sold the building to new investors about a year go.  The question is whether their business model anticipated this kind of strain in the retail sector.  There is a real risk that many retailers in the mall may shutter their doors locally as companies declare Chapter 11 bankruptcy to stave off shutting down entirely.  If that happens, the Newgate Mall may ultimately end up in the same place as the former Ogden City Mall…in a landfill.  The economic model of suburban malls is ailing quickly in an era of internet sales.


So, look for some interesting drama at the Newgate Mall.  Also look for churn in the housing market as workers at Convergys abandon leases or consolidate lifestyles depending on how quickly they find new work.