July 24, 2019

Amazon to Convert Another Dead Mall Into a Fulfillment Center

Online Retailer Leads Change That Kills Malls, Buys the Corpses for Last-Mile Delivery.

Online retailer Amazon has spent the past two decades luring shoppers out of stores and onto the internet, leading a retail transformation that has left dead malls in its wake. Now the Seattle-based company is buying more of those empty shopping centers, converting them into warehouses for processing deliveries to consumer doorsteps.

The company plans to open two more Ohio warehouses, including one at the site of a closed mall in Akron, the third shopping center in the northeastern part of the Buckeye State the company has bought and converted into a fulfillment center. But it isn’t limited to Ohio.

Around the country, CBRE Group this year identified 24 projects where developers have turned closed malls and shopping centers into logistics properties since 2016, with almost 8 million square feet of retail either converted to or replaced with 10.9 million square feet of new industrial space.

Among the advantages of converting malls to logistics facilities are their locations near population centers. That makes it easier to provide next-day or same-day delivery to customers, with easy access to highways and mass transit and water, sewer and parking systems already in place.

“This trend will continue to grow as the balance between brick-and-mortar retail and e-commerce shifts to necessitate more logistics space and less physical retail space,” CBRE said in a report, “Trading Places: Retail Properties Converted to Industrial Use.”

Three years ago, CoStar analysts predicted that owners would need to upgrade, repurpose or demolish 1 billion square feet of dead malls and other U.S. shopping space to reduce vacancies and return retail property to normal levels of productivity.

With online shopping increasing at roughly four times the rate of total retail sales and cutting deeper into spending at physical stores, owners are stepping up the sale or conversion of dead malls and distressed shopping centers, particularly in suburbs and rural areas most vulnerable to the effects of e-commerce and store closings, CoStar Portfolio Strategy Managing Consultant Drew Myers said in the midyear State of the U.S. Retail Market report.

And opportunistic buyers are scooping up sites that are ripe for turning into apartments, warehouses and other uses.

“We’re seeing a blurred line between industrial and retail, along with their increased need for integration,” CoStar Economist Christine Cooper said during CoStar’s midyear industrial review. Cooper added that plans for Amazon and other retailers for same-day delivery are driving up demand for distribution facilities closer to residential centers.

For its most recent plans, Amazon said it will build a 700,000-square-foot distribution hub at the northeast corner of Crossroads Parkway and South Compass Drive in Rossford, five miles southwest of Toledo, Andre Woodson, who manages Amazon public relations and communications in Ohio, said in an e-mail.

The company also intends to build a 700,000-square-foot fulfillment center at the site of the former Rolling Acres Mall at 2400 Romig Road, which was built in 1975 and had as many as 140 stores totaling 570,000 square feet before spiraling into decline in the 1990s and early 2000s. The mall’s ruins, decimated by water damage, graffiti and vandalism, were documented in pictures and video made between 2012 to 2016 and posted on deadmalls.com and other sites dedicated to abandoned malls.

Construction schedules for the Akron and Rossford projects, which are expected to bring a total of 2,500 jobs to the state, are still being determined, Woodson said.

No Bidders

Rolling Acres Mall was scheduled to be auctioned off in May 2009, but California-based investor Premier Ventures acquired the property in 2010 after no bids were received, according to CoStar data.

J.C. Penney, the mall’s last department store, closed in 2013 and Premier Ventures filed for Chapter 11 bankruptcy protection in 2014. After a series of sales failed, Summit County foreclosed on the mall and J.C. Penney gave its building to the city of Akron in 2016, and the mall and department store sites demolished between 2016 and 2018, according to Akron and Summit County documents.

As aging malls and brick-and-mortar retailers close, Amazon has been looking more and more to snap up the real estate of the retailers they helped to put out of business as shoppers shift their preferences to e-commerce and in-store pick up. Amazon has already redeveloped two former mall sites near Cleveland into fulfillment centers, opening a facility on the site of the former Randall Park Mall, a vintage-1976 shopping center in North Randall, Ohio, that closed in 2009.

The internet retailer is preparing to open another center at the site of the Euclid Square Mall in Euclid, which was built in 1977 and demolished in 2017 and 2018 after efforts to re-position it failed.

Ohio Gov. Mike DeWine said in a statement that the Akron and Rossford roll out shows that “Amazon continues to demonstrate confidence in the great workforce and e-commerce business climate we have in Ohio.”

Amazon Vice President of Global Customer Fulfillment Alicia Boler Davis said in the statement that the company now has more than 8,500 employees in the Buckeye State, not including the 2,500 expected new hires in Akron and Rossford at facilities used to pack and ship books, electronics, toys and other small items to Amazon customers.

The converted malls and big-box retail stores favored by Amazon and other logistics developers are mostly in areas with lower median household incomes than the national average where industrial space is also in short supply, which makes the properties more valuable as industrial space than retail, according to CBRE.