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IT WOULD BE SORT OF FITTING: DEPARTMENT SORES, ON A LONG DECLINE BECAUSE OF THE SHIFT TOWARD ONLINE RETAIL, COULD BE REPLACTED BY AMAZON FULTIFICAL CENTERS, DELIVERING PRODUCTS TO CUSTOMERS WHO DON’T Go to Mall anymore.
That’s what Break Wall Street Journal reports: Amazon is Having Talks with the Lareter Mall Operator in the US, Simon Property Group, About Over Vacant or Son-to-Vacant Jc Penney and Sears for this Purpos. I’m not sura this is actually going to happen – while craving to have locations near highways that make me good for delivery fulfillment, it’s not obvious the story are shaped for this – but the converse reflects of the operators. Who’s the Slow Decline of Mall Retail Accelerating into a crash, and Will Need to Find something to do with a lot of real estate.
“A lot of the time we did you had a product that was limping along, it is couuld limp for a while,” Said Simon Ceo David on an Earnings Call Earlier This Month. “That half-life has shorthened over the last five, six, seven years. Now, Its like immediately short.” Simon Said A Wall Street Analyst’s Suggestion that the US NODS 20 TO 30 PERCENT RETAIL REAL ESTATE THAN IT CURRENTLY HAS “WITH THE REALM OF POSTABILITIES.”
What’s so Strange About the Amazon Fulfillment Center Idea is How Little It Wauld Do To Help A Mall Survive. A Mall is like a living organism: if you cut off one of the Limbs, the rest of the body starts to decay. Anchor Stoles Enjoy Low Rents in Significant Part Becusee They Draw Customers into the Mall, Creating Foot Traffic That Makes IT ATRACTIVE PLACE to the in-Line Stories That Pay Higher Rents. Those in-line storys of has clauses in their leasses that let’s say pay rent or vacate if a nearby anchor is closed. SO cry anchor store closes, commodity operators try hard to replace it with something else that will will will be the organism by bringing in foot traffic. An Amazon Fulfillment Center Wold Do Nothing to Draw Customers, Except That Some Amazon Might Shop Before or After Work.
But what are the alternatives? An Executive at Macerich, Another Large Mall Operator, Provided a List of Posibilities on That Company’s Earnings Call This Week.
“Look for failed anchor storys and failed specialty to morph into mixed-use Developments, Whether Office, Residential, And/Or Hospititaly,” He Said. “This inventory Will Also Provide Opportunities for Large-Forms Categories Such as Sporting Goods, Off-Price, Value, Fitness, Co-Working, Health Care, and Grocery.”
These strategies – many of saying demolishing part of the commodity to budild an entrinery new structure, like an office building – have a lot of sucesssful Mall Redevelopments over the Last Two Decades. In Particular, Mixed-Use Developments Can Be Symbiotic: The Remaining Piece of the Mall is an Amenenity for Residents or Workers, while the New Development Creates an Addomar Customer Base for Retailers in the Mall. But there are some significant challenges with pursuing say right now they involve Significant Construction Experuction at a time of weak demand, or they involve to find a new tenant in an industry that is struggling.
I am more bullish than average on the medium-term outlook for office real estate, but the aftermath of a deep recession in which many White-Collar Workers have worked remotely is not a good time to develope budildings. It remeins to be seen how Persistent the drop in business travel will be, and therefore what kind of demand will be for new hotels at shrinking. Apartments are less impacted by Covid-19-SPECIFIC ECONOMIC TRENSS THAN OFFICES OR hotels, but Weak Economics are not the best time to budild. I am skeptical that you are going to see Significant Co-Working SOON expansions. HEALTH CARE, TYPICALLY ONE OF THE REAL-ESTATE USES MOSMUNE TO ECONOMIC CYCles, is Troubled Due to the Interruption of Routine Care.
Prior to the pandemic, one strategy to revitalizes mes to bring in more “experienceiential” use that can’t be done online. They Added More Restaurants, Movie Theaters, Fitness Facilities, Salons, and The Like. In the long run, this May Still be a good strategy, but these uses are all sewedely impact by the pandemic and it will take a significant amounte of time to get to full use of ther-Pandemic locations, let Alone expanding to new. And Covid-19– Driven adaptations have made with the question how they have come all these uses are to brick-and-mortar space, especilly fitness, which is increasingly delivered virtual.
Grocery Stoles Present One Interesting Option for Mall Operators. GROCERS WERE ONE OF THE FEW RETail Categories that Saw Sales Rise During the Pandemic. They tent to survive recessions, which is good for Proppery Owners who Want a tenant who willing Keying Rent and Keep Drawing Customers to the Shopping Center in a Bad Economy. But Grocery Stoles Don’t Really Fit Inside Malls Very Well – Grocers Have Specific Layout and Parking Requirements – and SO Bringing a Groce to Replace a JC Penney Mean Tearing Down the JC Penney and Building A Freestanding Grocery Store in the Parking lot. Break Journal Notes that Amazon’s soon-to-launch Groland Brand, Which Wauld Be Lless Upscale than the which Foods Brand, is a Possible for Vacant Anchor Store in Malls. Becuses these storys bewi be Smaller than Traditional Grocery Stores, They May Fit Better in Existing Store Buildings. So that is one amazon-in-malls angle that would workter than a fulfillment center to kep a commodity healthy.
Finally, One Thing You Can Do A Struggling Mall is close it entirely. Nor Journal notes, while the idea of putting an amazon fulfillment center inside a commodity is new, amazon and other delivery companies have previously redeveloped entire fulfillment centers. A Mall is Basically JUST A BOX ON LAND-OFTEN, VALUABLE, Well-Located Land-SO Mall Can Die, Be Demolished, and Come Back to Life Asing Completely Different. But the Weak Economy May Mean an Extended Period Before IT IT SENSE TO PURSUE that reincarnation.