Are malls better off as fulfillment centers?

Discussion
Feb 05, 2019
Matthew Stern

As the retail world continues to grapple with the future fate of shopping malls, a new trend is emerging in the use of former mall space — it’s going industrial.

A recent study discovered 24 U.S. malls that had been converted into some type of supply chain fulfillment center or warehouse since 2016, CNBC reported. Dead malls are being turned into Amazon.com fulfillment locations and other types of hubs, supporting third-party logistics that have emerged alongside the e-commerce boom.

While this shift to fulfillment space may work for malls no longer serving as retail outlets (and in some instances being torn down entirely to make room for warehouses), other operators are experimenting with ways to keep the mall model alive by using more effective draws than no-longer-popular mall anchors.

Some experts have suggested that food halls, in-mall grocery stores, farmers markets and even food preparation facilities could be key in reviving mall traffic. A few major grocers have already taken up residence in shopping malls, with both Whole Foods and Fresh Market finding homes in former Sears spaces.

Other malls have begun opening fitness centers alongside traditional stores, turning the mall into a lifestyle destination where visitors can exercise and do their shopping in one location. Some have even begun folding residential units and coworking spaces into the mix.

And others have begun to enhance the shopping mall experience with more exciting store offerings. The popular Edit@Roosevelt Field concept in Long Island has reconceptualized the mall as a place for a rotating lineup of pop-ups that provide a physical place for otherwise online-only brands. Other malls have brought in retailers like Rose & Loon, which curate and sell artisanal products exclusively from local vendors.

DISCUSSION QUESTIONS: Do you see more malls being converted into fulfillment centers in the years to come? How strong a future do you see for malls to continue as retail and lifestyle destinations?

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Braintrust
"Add fulfillment centers to the growing list of new uses for malls!"
"Alas, in the end, Victor Gruen could not save us from his worst invention, and now we must save ourselves from his monstrous creation."
"If the mall owners are stuck with the question of “how do I fill this building up?” they are asking the wrong question."

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14 Comments on "Are malls better off as fulfillment centers?"


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Dick Seesel
BrainTrust

There isn’t a “one size fits all” solution to the challenges facing today’s regional malls. There are “zombie malls” around the country that are either boarded up entirely or struggling with the loss of multiple anchors — in these cases some sort of commercial repurposing (fulfillment centers, light industrial usage) makes more sense than trying to restart a pulse.

But I don’t see this as a widespread solution for the majority of malls around the country. Even secondary malls still serve a purpose for shoppers — and still command rents that may be impractical for somebody looking for a distribution center site. It’s up to the mall developers to find new tenants for empty spaces, and above all it’s on the retailers to stay relevant to the mall shopper.

Dave Bruno
BrainTrust

In my opinion, the future of the mall is as a lifestyle center, and fulfillment convenience is a part of the modern lifestyle. So while I do think fulfillment centers will play a role, I think that malls will re-emerge as well-rounded lifestyle centers that include fitness, shopping, food, entertainment, etc.

Ralph Jacobson
BrainTrust

Another example of retail evolution. Demand is shifting from in-store shopping to online. Less need for physical stores requires more physical space to handle the distribution of products that used to be sold in those stores. No surprise here.

Rich Kizer
BrainTrust

I read some time ago that there are approximately 275 malls across the country that will have to be shut down and demolished or repurposed. Certainly fulfillment centers are likely candidates as replacements. So are manufacturing ventures. This type of evolution will create jobs, incorporating construction jobs to re-fit facilities as well as ongoing job positions. Something those particular properties have not been doing in the communities. Retail malls will not go away, but I believe we will see a mandate to change at least 10 percent of the way they do business (both outlets and the facility) each year. That’s a 30 percent change in just three years — I think that is what it’s going to take to keep the centers vibrant.

Bob Amster
BrainTrust

The percentage of repurposed malls that end up as fulfillment centers is relatively small. Depending on the location and demographics of the area, a repurposed mall can become many other things (health clinic, life-style center, university branch, office space) and not necessarily a fulfillment center.

Ricardo Belmar
BrainTrust

Add fulfillment centers to the growing list of new uses for malls! There is no doubt malls are going to change – some will become lifestyle destinations, while others may go a more industrial direction. It just depends on the location and ability to draw customers. We all know there are zombie malls that can’t be saved with traditional stores. Others will invite DNVBs to open pop-ups or semi-permanent stores to attract customers, and some malls will be combinations of “all of the above”. The mall as we know it is undergoing significant transformational change and this process is only beginning!

Ed Rosenbaum
BrainTrust

This could be a good idea to find other uses for malls that are no longer deemed as good retail facilities. There are problems I envision such as, who is going to pay mall rental rates for distribution center usage? Most malls are located in prime areas with nearby residential neighborhoods. Unless there can be added uses, more than a DC, this might raise concerns about the property values. A possibility might be to add tech facilities along with the DC. I recall we had this discussion a few years back. It seems to crop up on a regular basis now.

Gene Detroyer
BrainTrust

If the mall owners are stuck with the question of “how do I fill this building up?” they are asking the wrong question. They have to look at themselves as real estate operators, not mall operators. The question should be “how do I get the best ROI on this land?”

That would mean a multitude of alternatives, including everything from continued retail space to tearing everything down and building office complexes. Getting stuck in something that doesn’t work just because we have it is simply bad business strategy.

Joanna Rutter
BrainTrust
14 days 18 hours ago
Alas, in the end, Victor Gruen could not save us from his worst invention, and now we must save ourselves from his monstrous creation. Malls are incredibly specific types of properties designed for now-frustratingly-specific purposes. Now that we want to revamp and repurpose them, all of their design problems (So much dead parking lot space! Bad public transit access! Have you ever tried air conditioning one of these things?) are going to be quite hard to fix at a physical level as well as successfully rezoning these for industrial or housing purposes. I want to believe every dead mall can become a mixed-use farmers market slash housing complex slash childcare center, like Victor originally did back in the day, but it seems like the process of rehabbing the old space is more work than it’s worth. Perhaps these dead malls were in the wrong place to begin with — constructed on census data and the assumption that people wanted to engage with space in the suburbs in a certain way. Maybe there’s nothing holy we… Read more »
Craig Sundstrom
Guest

I don’t really see this as being a big trend. Most warehouse space is purpose-built for a reason, it’s more efficient that way (and of course the same could be said for any other kind of building from retail to hospitals, etc.). Oh, sure, there are some (former) malls that are good for conversion, but I think that’s really more a coincidence that anything else … so irony, but nothing else.

Bill Friend
Guest

Repurposing shopping malls into fulfillment centers is not likely a growing trend, but there will surely be instances of it where location and cost make the option viable. In most cases, it will only be a big player like Amazon that can make the math work. Shopping online will continue to grow but a trip to the mall should deliver significantly more than an online browsing shopping experience.

Malls need be a destination that delivers an experience sought after by shoppers wanting food, entertainment, social engagement and serendipitous discovery of desirable items that delight and attract. There is ample evidence that malls that have gone through this transformation and are committed to engaging “visitors” are doing just fine.

Jamie Gray
Guest

Shopping as a delivery mechanism will adapt. Remember the classic catalog store/showroom stores, like Best Products? Grocers and other retail outlets may take a similar approach to help better control inventory. Instead of visiting a store to select a product that will be delivered on a set of conveyor belts, consumers create their initial requests online or in-app, then pick up their order at a smaller concept store or delivery center. Many grocers are testing this basic concept today with curbside pickup options. The next step will be outlets that only offer pickup. Sure, there will be full service stores too, just fewer and farther between.

Lee Peterson
BrainTrust

I think it’s a combo. We tested the idea of being able to have a BOPIS pick up outside the mall for anyone that was in the mall and it tested really well, especially with digital natives. But from the same test, what’s really going to drive traffic back to shopping centers is a change in tenant mix, especially with increased amounts of better/healthier/more modern food options (NOT the food court as is). Think of it — increased dwell time, experience retail, social interaction and refreshments all wrapped into one.

Gone are the days of rows and rows of specialty apparel as a draw. Anchors too. So 1990s.

Oliver Guy
Guest

Using malls as fulfilment locations makes a lot of sense given proximity to population centres, convenience in terms of parking etc. Larger experience-based malls still have a part to play in terms of being lifestyle & leisure focused. There could be a combination that could be valued by customers — pick up your shopping on a trip to the cinema or after eating a meal out.

wpDiscuz
Braintrust
"Add fulfillment centers to the growing list of new uses for malls!"
"Alas, in the end, Victor Gruen could not save us from his worst invention, and now we must save ourselves from his monstrous creation."
"If the mall owners are stuck with the question of “how do I fill this building up?” they are asking the wrong question."

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