More shopping center and mall space could be repurposed for industrial distribution as e-commerce continues to take market share from brick-and-mortar retailers, Fitch Ratings analysts said in a report Tuesday.
Excess parking facilities and underused retail space could be redeveloped into small-scale last-mile delivery or pickup facilities, according to Fitch Ratings.
A significant amount of space is coming available as retailers speed up store closures, with Credit Suisse estimating that more than 8,600 retail locations will close this year.
The trend is already having an impact in both brick-and-mortar and online retailing. Brick-and-mortar retailers are converting closed stores and repurposing space in existing stores to serve as makeshift distribution centers. Meanwhile, online merchants are opening physical locations to reach more customers with services such in-person pickups and returns.
“The function of the real estate is the same: providing a way to distribute goods to customers,” said Fitch Ratings.
Shopping centers and malls that are located in areas with higher per-capita income and population density could be more easily repositioned with additional delivery and pickup amenities, said Fitch Ratings. In denser areas where land is scarce, retailers who are focused on speed of delivery are considering warehouse space in former shopping malls already located near residential communities.
In the first quarter, e-commerce took up 8.5% of all retail sales, up from 3.8% in the first quarter of 2009, according to data from the U.S. Census Bureau. Total retail sales rose 5.1% in the first quarter from a year ago, while e-commerce sales rose about 15% over the same period.
More landlords and private-equity firms that own struggling retail properties are also considering repositioning their holdings to include a mix of retail and other uses such as medical office, call centers and offices.
While e-commerce is seen by many as the primary source of headwinds in the retail industry, many retailers had been slow to adapt to changes to their customers’ mindsets on how they purchase their goods.
“The market is placing less emphasis on ‘stuff’ and most retailers have failed to place sufficient emphasis on innovation, merchandizing and in-store experience,” said Terry Montesi, chief executive officer of Trademark Property Company, a Fort Worth, Texas-based real estate investment and development firm.
Requests for changes to zoning codes that allow distribution facilities in places already permitted for retail might be more easily approved if the alternative would result in a blighted shopping center, lost jobs and tax revenue, Fitch added.
For now, many shopping centers, such as the Great Lakes Mall in Mentor, Ohio, and Francis Scott Key Mall in Frederick, Md., already house Amazon.com Inc. Lockers as landlords aim to also cater to consumers who purchase items online and choose to pick up their goods.