While Amazon (AMZN 1.08%) has used abandoned shopping malls in the past as locations to build new fulfillment centers, Simon Property Group (SPG +0.07%) wants the e-commerce giant to use the stores of bankrupt retailers in its malls for fulfilling online orders.
The Wall Street Journal reports the mall operator has been in negotiations with Amazon over using the J.C. Penney (JCPN.Q +0.00%) and Sears (SHLDQ +0.00%) stores in Simon malls. Simon malls currently have 63 Penney stores and 11 Sears stores.
Image source: Amazon.com.
Better than nothing
For a time, shopping malls may not have minded their anchor stores going under and abandoning their location because the department stores often paid below-market rents and the mall operators could lease the space to smaller retailers at significantly marked up prices.
Seritage Growth Properties (SRG 1.15%) did that with Sears before it went bankrupt. It was able to convert the $4 per square foot the retailer had been paying to an average of $12 per square foot, and in some cases, almost $20.
But shopping malls are in decline now as customer traffic falls, which is why Simon Property Group has been buying retailers such as Aeropostale, Brooks Brothers, and Forever 21, which all filed for bankruptcy, to ensure their stores don't go vacant and drive more customers away.
Department stores are large spaces to fill, though, some 100,000 square feet or more, and though Simon would likely have to discount the rent since warehouse space often goes for less than $10 per square foot, it would be better than a massive vacancy.
The Wall Street Journal says Amazon has also been talking to mall owners about putting its new grocery stores into empty JCPenney stores.
