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August 10, 2020 11:00 AM, EDT

Mall Operator Weighs Empty Spaces as Amazon Centers

Inside a Simon Property mall in New York in 2018.Shoppers walk past stores at a Simon Property mall in Garden City, N.Y., in 2018. (David Williams/Bloomberg News)

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Mall operator Simon Property Group Inc. has been in talks with Amazon.com Inc. to turn some empty store space formerly occupied by anchor tenants such as J.C. Penney Co. Inc. and Sears Holdings Corp. into Amazon fulfillment centers, Dow Jones reported, citing people familiar with the matter.

The discussions started before the coronavirus pandemic, with the two companies exploring the idea of buying out occupied space from the retailers in some cases.

Amazon has also been in talks with multiple mall landlords about putting its coming grocery store chain in J.C. Penney locations, a person familiar with the matter told Dow Jones, though it couldn’t be determined if that included Simon malls.

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It wasn’t clear how many stores are under consideration for Amazon, and it is possible that the two sides could fail to reach an agreement, the newswire said.

Shares of Simon have fallen 58% so far this year. It’s partnering with Brookfield Property Partners to jointly bid for J.C. Penney, which filed for bankruptcy in May.

Turning over anchor store spaces in prime locations to Amazon would represent a major shift in the mall business. If Simon rents the space as fulfillment centers, it would probably accept a considerable discount to what it could charge another retailer, Dow Jones said. The choice also won’t please nearby tenants: fulfillment centers draw less foot traffic to the mall, and it would help make Amazon, seen as a disruptor of retail businesses, even more competitive.

Even before the pandemic, Amazon has already bought the sites of some failed malls and re-purposed them to distribution centers. The e-commerce giant continues to open up new fulfillment centers to meet the demand for delivery, and its virus protection for warehouse workers has come under scrutiny.

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