“I see articles about Amazon building here and Amazon building there. I’m not sure any of us really fully understand the implications because it’s happening so so fast,” the resident of one such neighborhood said.
By Leticia Miranda
Malls that buckled due to e-commerce or suffered during the pandemic are being given new life by the very entity that precipitated their decline — Amazon.
Over the last several months, the retail giant has gone on a shopping spree of its own, buying up disused malls across the country and turning them into distribution centers.
In March, Amazon won approval to turn a mall in Baton Rouge, Louisiana, into a 3.4 million-square-foot distribution building, and a mall in Knoxville, Tennessee, into a 220,000-square-foot distribution center.
In December, the local planning board in Worcester, Massachusetts, signed off on Amazon’s request to convert the city’s Greendale Mall into a 121,000-square-foot distribution center.
Between 2016 and 2019, Amazon converted around 25 shopping malls, according to an analysis by Coresight Research.
Last year, it was reportedly in talks with Simon Property Group, the country’s biggest mall owner, to convert bankrupt JCPenney and Sears department stores into fulfillment centers.
Target and Walmart have also turned some space in their own stores into mini fulfillment centers.
“The reality is that the cash flow at these lower-quality malls is declining rapidly,” said Vince Tibone, lead retail and industrial analyst at the real estate analytics firm Green Street. “You have to decide, ‘Do I want to do something myself to invest a lot of money to transform this dead retail into thriving retail or put up offices?’ Selling a dead mall as land is a more attractive option.”
About 50 percent of mall-based department stores could permanently close by the end of 2021, according to Green Street.
The majority of these mall closures are expected to be lower-tier shopping centers that make less than $320 per square foot of space, which makes it difficult to cover their mortgages, Tibone said.
Malls are already struggling to keep up with mortgage debt. Macerich, which runs about 50 shopping centers across the country, announced in February it is restructuring to rein in $1.5 billion in debt that comes due in July.
CBL Properties, whose major tenants include Victoria’s Secret and Foot Locker, reached an agreement in March with lenders to shave $1.6 billion from its balance sheet.