The Wall Street Journal this morning reports that "mall operators, faced with a sharp downturn in foot traffic, are looking into the viability of converting empty commercial space into mini-fulfillment centers for their remaining retail tenants, technology vendors and analysts say."
Some context from the Journal story:
"The pandemic has dealt a crushing blow to large mixed-retail malls, which were already struggling before the crisis. Many were declared nonessential businesses and closed by local governments as early as March. At a handful of malls that reopened in Georgia, Texas and other states in early May, foot traffic was down an average of 83% compared with the same period last year, according to Placer.ai, a research firm that uses cellphone data to track consumer behavior.
"Two midsize mall owners, CBL & Associates Properties Inc. and Pennsylvania Real Estate Investment Trust, filed for chapter 11 bankruptcy protection this month. Many large stores that lease retail space in malls have also filed for bankruptcy in recent months, including Neiman Marcus Group and J.C. Penney Co."
And, the story says, "Failed malls have been an attractive target for Amazon.com Inc., FedEx Corp. and DHL International GmbH, looking for strategic distribution hubs near main highways and residential areas. The sites are typically used to store products or packages ahead of last-mile deliveries to customers."
- KC's View:
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Troubled mall companies already have started investing in faltering retailers - like when Simon Property Group invested in Brooks Brothers - as a way of keeping those retailers in business. This keeps those stores open in their shopping centers, which also can prevent the domino effect of other retailers closing down.
I've long wondered about the intelligence of this approach. Does "troubled" plus "faltering" equal "success"? Not in my experience.
Turning empty stores into micro-fulfillment centers for other mall tenants, not to mention the likes of Amazon and FedEx, may be the next best option … until, of course, they decide to convert their real estate into senior citizen housing, health care facilities, community colleges, and who knows what else.
