Amazon Looks to Save Malls

Amazon Looks to Save Abandoned Malls

COVID-19 has left a lasting impact on brick-and-mortar businesses and changed the landscape of commercial real estate. With anchor businesses such as Macy’s, Sears, and JCPenny closing stores, malls are becoming vacant.

Simon Property Group is the nation’s largest mall owner and has made recent moves to change its business as retail businesses change. JCPenny filed for Chapter 11 bankruptcy, which may allow the company a way out of their leases with Simon.

Simon made a move to buy JCPenny, and after long and rocky negotiations, they reached an agreement where JCPenny signed a letter of intent to sell to Simon.

The landlord has also recently closed on a deal giving them part-ownership of Brooks Brothers. They have also purchased Lucky Brand, another retailer that had filed for Chapter 11 bankruptcy.

Wall Street is concerned that Simon is trying to keep its tenants afloat out of desperation, but the landlord seems to have bigger plans for its future business, including repurposing the vacant stores.

Recently, Simon has been negotiating with Amazon to use former JCPenny and Sears stores as fulfillment centers, which could be mutually beneficial if they can reach an agreement. If a fulfillment center replaces another retailer, other tenants may not appreciate the lower foot traffic. However, with fewer businesses wanting to expand into retail space in a mall, Simon must consider other options in these challenging times for brick-and-mortar retailers.

As landlords of commercial real estate continue to lose retailers, we will likely start seeing retail stores change into industrial space. Simon also has other concepts they’re exploring on how to transform dying malls. These changes won’t happen overnight, as changing retail space to fulfillment centers or other industrial uses would be costly and take time.

If Amazon can seal the deal with Simon and bring in new fulfillment centers, it will be one step closer to getting orders to its customers even faster.