Amazon has a plan to save vacant mall department stores

Posted:
in General Discussion edited August 2020
Amazon is reportedly in talks with mall owners to use empty department stores previously operated by J.C. Penney and Sears as distribution hubs, and it, coupled with Apple's high retail draw give American malls the best chance to withstand the coronavirus pandemic.

The Anchorage 5th Avenue Mall [via Simon]
The Anchorage 5th Avenue Mall [via Simon]


Online retail has been a thorn in brick and mortar retail's side, with consumers shifting their attention to cheaper virtual storefronts instead of the real thing. The financial troubles of major retailers like J.C. Penney and Sears has put a strain on the commercial real estate industry, which has reportedly prompted Amazon to take advantage of the decline of malls.

According to the Wall Street Journal, Amazon is in talks with the Simon Property Group, the largest mall owner in the United States, about taking over some of the department stores that are enduring financial hardship. J.C. Penney and Sears have both filed for chapter 11 bankruptcy protection, with the closure of stores part of their plan to restructure their businesses.

The report suggests that Amazon is keen to take over a number of the closed or soon-to-close stores for its own operation, with Simon malls housing 63 J.C. Penney and 11 Sears locations as of May. However, rather than putting its own stores in place, Amazon would instead use the former department stores as warehouses and distribution centers for its online sales.

As large spaces that are generally larger than 100,000 square feet, department stores are ideal for use in other large-scale applications, such as product distribution centers. Aside from their size, the location of the malls is also advantageous for any business that relies on creating its own distribution networks, due to being much closer to where their customers live.

While talks are ongoing, malls may not necessarily wish to give up the prized department store spaces that easily. The general business plan for a mall is that a major department store partner occupies a main space and draws customers in, while smaller retailers fill out the rest of the location and take advantage of the foot traffic.

However, if Amazon were to take over the storefronts and turn them into distribution centers instead of retail outlets, malls would lose out on having an attractive centerpiece, and the reduced footfall could go down even further, worsening the situation for mall owners.

Some report sources suggest Amazon has also been in talks to bring its grocery store chain to former J.C. Penney outlets, which could provide a more conventional retail element to plans, though it is unclear if such talks are being made with Simon Malls.

There may not necessarily be that many other options for mall owners to bring in another department store partner. For example, Lord & Taylor and the Neiman Marcus Group have filed for bankruptcy, while Nordstrom has closed 16 of its stores in the last few months.

For Amazon, the ailing malls could prove to become a cheaper venue for its distribution than the usually better value warehouses. A warehouse would usually cost under $10 per square foot in rent, a fraction of the cost of a smaller consumer-facing outlet that would be used by a restaurant, for example.

However, mall operators keen to make agreements with department store chains have offered rents as low as $4 per square foot. Given the struggle of malls in the current climate, it is plausible that Amazon will be able to secure a rent that's not much higher than that.

Apple could help save malls

While the decline of malls may see department stores exit in favor of Amazon distribution centers and other types of businesses, this may provide an opportunity for Apple to step in. The Apple Stores are already a highly-popular outlet, and though locations aren't as big as a typical department store, they do tend to take up a lot of floor space for the Today at Apple sessions and other elements.

As Apple is ever keen to expand its retail empire on its own terms, it may look at the Amazon-Simon situation and want to take advantage of the same benefits, namely large amounts of floor space at cheap prices. Unlike Amazon, which will most likely involve a non-consumer operation, Apple's retail would still be a consumer-facing element of a mall, as well as being one that attracts foot traffic, giving mall owners a good reason to provide beneficial terms to Apple.

According to Simon's website, there are 54 Apple Store outlets across its entire network of malls.

In 2015, a report revealed Apple paid as much as 2% of its sales revenue to malls, far smaller than the typical 15% paid by other tenants. The disparity is in part due to mall owners increasing rents for storefronts positioned next to or near Apple's outlets, despite the Apple Store not being considered an "anchor" tenant.

At the same time, the percentage also reflects a major difference in sales numbers, due to Apple's premium pricing.

Apple is already attempting to take advantage of the weak retail property market, in part affected by the COVID-19 pandemic, by asking landlords in the UK to cut rents in half and to provide a payment holiday, in return for an extended lease.

Alternately, it is also feasible for Apple to take the same route as Amazon and use the department stores as a large block of space for other tasks. It already rents out office spaces of a similar size around the world for its staff to work within, and a department store would be useful as a considerably cheaper way to increase its real estate footprint.

Turning department stores into office space isn't new. Web hosting company Rackspace turned the Winsor Park Mall in San Antonio, Texas into its corporate headquarters.

There is even the possibility of Apple using the distribution network concept, but in another way. Apple could easily install a server farm into a mall's department store space, providing access to its services to customers at a much shorter distance to current regional offerings.

Comments

  • Reply 1 of 14
    SpamSandwichSpamSandwich Posts: 33,407member
    Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people.
    Japheypulseimages
  • Reply 2 of 14
    DAalsethDAalseth Posts: 2,807member
    Malls have been on the way out for the last decade. They were a great idea in the '50s but their time has come and gone.
    Though I can't support making them into warehouses. A better idea that I've read about is converting the empty anchor tenant spaces into housing, senior housing, or lower income housing. The added local population would help the rest of the stores in the mall survive.
    Convert them into Amazon drudgery centres, takes them out of the equation and the rest of the mall will continue to die. 
    ronngatorguyrandominternetperson
  • Reply 3 of 14
    dr. xdr. x Posts: 282member
    DAalseth said:
    Malls have been on the way out for the last decade. They were a great idea in the '50s but their time has come and gone.
    Though I can't support making them into warehouses. A better idea that I've read about is converting the empty anchor tenant spaces into housing, senior housing, or lower income housing. The added local population would help the rest of the stores in the mall survive.
    Convert them into Amazon drudgery centres, takes them out of the equation and the rest of the mall will continue to die. 

    I agree that housing is the best use of the space in malls, take a look at America's oldest shopping mall has been turned into beautiful micro-apartments on business insider. I feel Amazon is getting way too big in my opinion.


    ronnBeatsspice-boy
  • Reply 4 of 14
    dewmedewme Posts: 5,423member
    DAalseth said:
    Malls have been on the way out for the last decade. They were a great idea in the '50s but their time has come and gone.
    Though I can't support making them into warehouses. A better idea that I've read about is converting the empty anchor tenant spaces into housing, senior housing, or lower income housing. The added local population would help the rest of the stores in the mall survive.
    Convert them into Amazon drudgery centres, takes them out of the equation and the rest of the mall will continue to die. 
    I've always thought that converting old malls into little self-contained neighborhoods with a combination of housing, recreation, and boutique retail and dining would be a great idea, especially in areas with harsh winters. There must be a reason why this has not caught on even though I've seen new senior care facilities built around a subset of this model, with indoor walking and pseudo green space with atriums for hanging out. Perhaps those old malls were massive energy hogs or the rents were outrageous. All of the Amazon mall conversions (to fulfillment centers) I've seen so far have been scorched earth do-overs, with nothing remaining from the previous structures.

    I'd be more than a little hesitant to lump Apple into this kind of a makeover plan for several reasons. First of all they need to be very measured about expansion in general. They also need to be selective about location. Putting an Apple Store in place of a failed traditional retailer in a slowly dying mall is like building your house in the middle of a cemetery. Sure, the neighbors are quiet, but Apple Stores thrive on high energy and being in a popular spot that people want to be at. They'd be better off with more smaller stores in prime locations, perhaps teaming up with Starbucks in downtown neighborhoods and staying away from the decaying suburban malls. 
    edited August 2020
  • Reply 5 of 14
    "Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people."

    The problem in the United States continues to be under reaction, i.e., a large percentage of the population isn't even willing to follow straightforward healthy safety rules. 
    ronnrandominternetpersonBeatspscooter63darkvader
  • Reply 6 of 14
    hmlongcohmlongco Posts: 543member
    Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people.
    I recall a time not too long ago when we underwent a major upheaval in our society when just 3,000 people died.

    Regardless, I said quite a few months ago that we should expect people to play the "overreaction" card, especially should the "overreaction" prevent a large number of deaths. It's really a no-win scenario. Prevent a lot of people from dying, and the resulting numbers "prove" we overreacted.

    BTW, 2% of the US population is 7 million people. Are you seriously suggesting they're all expendable? Or does it just happen that most of the deaths are in classes of people you believe to be expendable?
    randominternetpersonronnBeatsDogpersondarkvader
  • Reply 7 of 14
    Hank2.0Hank2.0 Posts: 151member
    First, an Amazon warehouse. Next, a small area is established for pick-up and drop-off (returns). So while people are waiting to  pick-up their purchase, another small area is made for spur-of-the-moment small purchases. Next thing you know, that area grows to the size akin to a gas station convenience store. inevitably, TA-DA!...

    J. B. AMAZON DEPARTMENT STORES!!! 

  • Reply 8 of 14
    BeatsBeats Posts: 3,073member

    "Apple could help save malls

    While the decline of malls may see department stores exit in favor of Amazon distribution centers and other types of businesses, this may provide an opportunity for Apple to step in. The Apple Stores are already a highly-popular outlet, and though locations aren't as big as a typical department store, they do tend to take up a lot of floor space for the Today at Apple sessions and other elements."

    I think Apple is better off investing in their own structures like Best Buy. They have attractive buildings and have more control.


    dr. x said:
    DAalseth said:
    Malls have been on the way out for the last decade. They were a great idea in the '50s but their time has come and gone.
    Though I can't support making them into warehouses. A better idea that I've read about is converting the empty anchor tenant spaces into housing, senior housing, or lower income housing. The added local population would help the rest of the stores in the mall survive.
    Convert them into Amazon drudgery centres, takes them out of the equation and the rest of the mall will continue to die. 

    I agree that housing is the best use of the space in malls, take a look at America's oldest shopping mall has been turned into beautiful micro-apartments on business insider. I feel Amazon is getting way too big in my opinion.



    Convert malls into senior centers? I don't like that idea. The malls I've seen are located in highly commercial areas too. I don't think seniors would like that either.

    I truly believe they can be saved but they have to be innovative about it. Would hate for Amazon to kill off a whole industry.
  • Reply 9 of 14
    dr. xdr. x Posts: 282member
    Beats said:

    "Apple could help save malls

    While the decline of malls may see department stores exit in favor of Amazon distribution centers and other types of businesses, this may provide an opportunity for Apple to step in. The Apple Stores are already a highly-popular outlet, and though locations aren't as big as a typical department store, they do tend to take up a lot of floor space for the Today at Apple sessions and other elements."

    I think Apple is better off investing in their own structures like Best Buy. They have attractive buildings and have more control.


    dr. x said:
    DAalseth said:
    Malls have been on the way out for the last decade. They were a great idea in the '50s but their time has come and gone.
    Though I can't support making them into warehouses. A better idea that I've read about is converting the empty anchor tenant spaces into housing, senior housing, or lower income housing. The added local population would help the rest of the stores in the mall survive.
    Convert them into Amazon drudgery centres, takes them out of the equation and the rest of the mall will continue to die. 

    I agree that housing is the best use of the space in malls, take a look at America's oldest shopping mall has been turned into beautiful micro-apartments on business insider. I feel Amazon is getting way too big in my opinion.



    Convert malls into senior centers? I don't like that idea. The malls I've seen are located in highly commercial areas too. I don't think seniors would like that either.

    I truly believe they can be saved but they have to be innovative about it. Would hate for Amazon to kill off a whole industry.

    What I meant was just normal living, say apartments for anyone to rent not just senior living. I feel that malls have been dying out slowly over the years.
    ronnBeats
  • Reply 10 of 14
    razorpitrazorpit Posts: 1,796member
    hmlongco said:
    Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people.
    I recall a time not too long ago when we underwent a major upheaval in our society when just 3,000 people died.

    Regardless, I said quite a few months ago that we should expect people to play the "overreaction" card, especially should the "overreaction" prevent a large number of deaths. It's really a no-win scenario. Prevent a lot of people from dying, and the resulting numbers "prove" we overreacted.

    BTW, 2% of the US population is 7 million people. Are you seriously suggesting they're all expendable? Or does it just happen that most of the deaths are in classes of people you believe to be expendable?
    You mean when we were attacked by terrorists? Ya, you have to respond to something like that or else they'll think they can get away with doing whatever they want. You can reference Seattle and Portland.

    We're around .005% death rate. And that's using the inflated numbers. We were told over 2 million were going to die from this, and thankfully we are no where close to that number. Almost half of the US deaths were "at home" in retirement communities wearing masks. You have three democrat governors to thank for that. I know more businesses that closed for good and people financially ruined then I do that have died from COVID. 

    Makeshift hospitals went unused, ventilators sat in warehouses, and doctors and patients were ostracized by the media and politicians over the mere mention of hydroxychlorquine.

    We all die in the end. However there's a lot of people that went sooner than they needed too and it wasn't because they weren't wearing a mask.

  • Reply 11 of 14
    MacProMacPro Posts: 19,758member
    Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people.
    Maybe you might end up in that  2% and can give us a different perspective if that happens.
    Dogpersonronn
  • Reply 12 of 14
    hmlongco said:
    Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people.
    I recall a time not too long ago when we underwent a major upheaval in our society when just 3,000 people died.

    Regardless, I said quite a few months ago that we should expect people to play the "overreaction" card, especially should the "overreaction" prevent a large number of deaths. It's really a no-win scenario. Prevent a lot of people from dying, and the resulting numbers "prove" we overreacted.

    BTW, 2% of the US population is 7 million people. Are you seriously suggesting they're all expendable? Or does it just happen that most of the deaths are in classes of people you believe to be expendable?
    What number of “expendable” people is acceptable for you? Because this is a no-win situation otherwise. Keep everything shut down permanently and more than millions will die.
    razorpit
  • Reply 13 of 14
    spice-boyspice-boy Posts: 1,450member
    I wish those malls could be housing for all the people that are now homeless because Amazon's monopoly on retail has made them unemployed and unable to pay their rent or mortgages. 
    ronn
  • Reply 14 of 14
    spice-boyspice-boy Posts: 1,450member
    MacPro said:
    Malls are dead and all it took was a global overreaction to COVID to destroy everything. I now know personally several people who’ve died from COVID, but even I recognize the number of people seriously affected range around >2% of a population. Not worth crippling economies and destroying lives for so few people.
    Maybe you might end up in that  2% and can give us a different perspective if that happens.
    Tell that to the families which have lost loved ones to this pandemic. Poor leadership has prolonged this pandemic and not only increased cases and deaths but destroyed the economy as well. We know better than this but there is no convincing people who deny science.
    ronn
Sign In or Register to comment.