Amazon eyeing mall space for distribution centers: report

Amazon and the largest mall owner in the U.S. are reportedly in talks to use space formerly used by department stores for the online retail giant’s fulfillment centers.

Amazon and Simon Property Group have discussed converting former and current J.C. Penney and Sears locations, according to The Wall Street Journal, which cited unidentified sources. Dozens of locations for both stores are set to close after both chains filed for Chapter 11 bankruptcy, the Journal noted, adding that Simon currently owns malls with 11 Sears and 63 J.C. Penney stores, according to May public filings.

The coronavirus pandemic has only accelerated the financial problems malls have faced for years, even after large indoor spaces reopened in several states. By contrast, Amazon reported its all-time best quarter for sales this year as customers increasingly relied on it for shopping.

Big box department stores are often the largest retail spaces in malls, and are frequently a source of traffic flow to smaller tenants. However, Simon’s other tenants would likely not lead to much added foot traffic, and many landlords have instead opted to replace department stores with businesses such as gyms or theaters. Those institutions, however, have also been affected by the pandemic and are not in a position to expand, the newspaper noted.

Simon would likely offer a deep rental discount to Amazon, compared to other potential tenants such as restaurants. Rent for warehouse space is typically under $10 per square foot, only a fraction of restaurant rates. Numerous U.S. malls already have some relationship with Amazon, including renting out parking space to the retailer’s delivery van fleets, according to the Journal.

“To replace department stores, mall owners considered schools, medical offices and senior living,” Camille Renshaw, chief executive officer of B+E, a real-estate investment brokerage firm, told the newspaper. “With the current pandemic, industrial is the only thing left now.”

The Hill has reached out to Amazon for comment.