Simon Property Group, the biggest mall owner in the United States, has reportedly been in talks with Amazon to turn some of the vacant anchor stores in its properties into fulfillment centers for the e-commerce behemoth, The Wall Street Journal reported over the weekend. The move makes perfect sense for Amazon as it would allow Amazon to plant fulfillment centers closer to some of its customers and speed delivery times. It would also serve as a way for Simon to fill empty blocks of space, especially as dozens of retailers filed for bankruptcy during the COVID-19 pandemic and many did not pay rent.
That said, retail space is not necessarily well designed for conversion. But there are benefits. Retail typically is equipped with large parking lots, which afford room for truck parking, truck maneuvering and possibly even room to expand. It is also likely that traffic patterns surrounding a retail center are already engineered to limit congestion and are typically accessible to population density, interstates and advantageous distribution corridors.
Big Box retail buildings can be an interesting conversion possibility. Retail-to-warehouse conversions for Big Box retail centers could be easier than converting a mall. Big Box retail centers are typically square or rectangular, often have taller ceilings and may not receive as much conversion resistance from a community. It can be easier for the public to digest the conversion of a home improvement store into a warehouse versus the conversion of a high-end fashion boutique into a warehouse. Malls are typically more challenging to utilize because they are irregularly shaped and frequently span multiple floors.
Although not widespread, retail-to-warehouse conversion is happening. But it is not necessarily a game changer for industrial. While provocative, this trend will likely only grow once developers are able to generate a successful conversion formula that balances the cost of community acceptance, location and the design requirements of these unique transformations.