By Joe Dyton for The Broker List
Mall owner Simon Property Group and Amazon are in talks to turn J.C. Penney and Sears stores into distribution centers, according to The Wall Street Journal. Both department store chains filed for Chapter 11 bankruptcy and closed stores across the country. Simon malls have 63 J.C. Penney stores and 11 Sears, according to the company’s May public filing. The number of stores Amazon is interested in has not been reported.
A potential deal falls in line with Amazon’s plans to create more distribution hubs close to residential to accelerate deliveries. It goes against Simon’s and other malls’ business model however, which is rely on anchor department stores to attract foot traffic that will also head to smaller stores as well as restaurants.
Unfortunately, the mall model has struggled in recent years. Many department stores have suffered the same fate as J.C. Penney and Sears.
Stores’ Loss is Amazon’s Gain
When big box department stores close, they often leave behind more than 100KSF on multiple levels. Their closure also hurts smaller mall tenants who count on the department store foot traffic to stop into their stores as well. A lot of the smaller stores have clauses that allow for lower rents or complete lease breaks if the anchor store remains vacant.
An Amazon fulfillment center taking the department stores’ place could possibly keep those clauses in place, but some landlords believe that situation beats keeping such a big space empty. Other mall tenants might not be as excited about an Amazon deal however. A lot of brick and mortar retailers blame the company for hurting their businesses. A neighboring Amazon fulfillment center could make competition that much steeper for local retail stores.
Plus, Amazon would not bring much, if any, of the foot traffic that a store would. Landlords (might) prefer the empty spaces be leased to an actual retailer, gym, theater or entertainment operator, according to industry sources.
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