Is an Amazon distribution center coming to your local Simon Property Group mall?
Seattle-based Amazon is reportedly in talks with the nation's largest mall operator to convert empty department stores including Sears and J.C. Penney anchor spaces into distribution centers.
The Wall Street Journal was first to report on the possible talks, citing people familiar with the matter. The Journal reported Simon’s discussions with Amazon began before the coronavirus pandemic led to temporary store closures.
Simon and Amazon didn't immediately respond to USA TODAY's request for comment Sunday. Sears and J.C. Penney declined to comment.
Department stores and apparel retailers with a heavy commitment to shopping malls have been grappling with declining foot traffic for years but the impact of the pandemic has led many retailers to accelerate store closings.
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Neil Saunders, managing director of consultancy GlobalData Retail, said the move makes sense as there will be an increasing number of vacancies, adding "it will be particularly hard to find new tenants for the large spaces once occupied by department stores."
"Some of the alternative uses that were once floated, like gyms, are no longer feasible in the short term. This means that warehouse and fulfillment centers are an increasingly appealing option," Saunders told USA TODAY on Sunday. "However, inviting Amazon in is, in some ways, giving more power to a rival, so there will be debate about whether this is the right thing to do. The fact Simon is considering it underlines the fact that they are in a difficult position."
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As many as 25,000 stores could shutter this year as businesses continue to feel the impacts of the pandemic, according to a recent report from Coresight Research.
Since May, Ascena Retail Group, parent company of Justice, Ann Taylor and Lane Bryant, New York & Company's parent company RTW Retailwinds, Lucky Brand, J.C. Penney, Brooks Brothers, Sur La Table, Neiman Marcus, Tuesday Morning, Tailored Brands, GNC, Lord + Taylor and J. Crew have all filed for Chapter 11.
Other retailers, who haven't filed for bankruptcy, also plan to shutter locations, including Victoria's Secret, Nordstrom and Signet Jewelers, parent company of Kay, Zales and Jared.
Analysts at Coresight, which tracks retail closures, project that about 25% of America’s malls will disappear within the next three to five years.
Mall occupancy rates hit their lowest level in at least a decade during the second quarter of 2020 at 94.4%, according to CoStar Group, which tracks real estate.
Of the nation’s 1,793 enclosed shopping malls, nearly 500 “are at risk due to their location being poor” or “due to their dependence” on office workers or tourism for foot traffic, CoStar senior consultant Kevin Cody told USA TODAY in July.
Saunders believes Amazon has more power than Simon in negotiations and is "unlikely to pay top dollar for the space."
"From Amazon’s perspective, most malls are near major population centers which means their fulfillment centers would be on their customers’ doorsteps," Saunders said. "They can also use locations as places where people can collect and return orders, adding yet more flexibility for shoppers."
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Contributing: Nathan Bomey, USA TODAY
Follow USA TODAY reporter Kelly Tyko on Twitter: @KellyTyko
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August 10, 2020 at 05:05AM
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