www.dcvelocity.com OCTOBER 2017 DC VELOCITY 43
uct sold in many malls.
Yet the land will remain, as will the structures—at
least for properties with the prospect of undergoing
some form of repurposing rather than demolition.
Many malls sit on large parcels with flat topographies
that would be capable of accommodating the needs
of a large DC. A large number of older malls are in
densely populated residential areas, though in some
cases, the neighborhoods may not be particularly
desirable. Many have decent road infrastructure, a
holdover from an era when developers and communities invested in roads to entice suburban consumers
to shop at the malls. “Where roadway infrastructure
once helped shuttle people to and from a mall, it
could now support the shipping or trucking of goods
and materials to and from a new distribution or fulfillment center, provided there are no issues from the
surrounding neighborhoods,” said Aaron Ahlburn,
director of industrial research for real estate services
giant JLL.
A BUYERS’ MARKET?
Amazon, which has never before taken this route to
build out its fast-growing fulfillment-center footprint,
is one of the country’s most influential companies.
Amazon’s halo effect alone could spur discussion over
malls’ budding potential as distribution centers or
e-commerce fulfillment hubs.
Those looking to take the plunge are likely to find
a buyers’ or lessees’ market awaiting them. For many
years, retail real estate commanded higher rental
rates than did industrial property. At the same time,
“capitalization” rates, the ratio of a property’s value
to its operating income, were traditionally more
compressed for retail than industrial. This meant
retail buyers were willing to pay higher rates for the
same amount of income compared with industrial
buyers. Since the Great Recession and the e-com-
merce explosion, however, the gap between retail and
industrial has significantly narrowed, according to
James Tompkins, founder of consultancy Tompkins
International.
NO SLAM DUNK
Converting traditional mall property to industrial
use is hardly a slam dunk, however. Repurposing
an entire standing mall into a facility supporting
large-scale DC operations is nearly impossible to do
because of severe configuration restrictions, said Joe
Dunlap, CBRE’s managing director of supply chain
services. Among the many shortcomings Dunlap
cites: low or irregular clearances, uneven floors, an
insufficient number of dock doors, inadequate sprinkler systems to protect high-value inventory, and a
chopped-up inner wall structure that makes worker
travel laborious and circuitous.
Demolishing an existing mall and rebuilding it
from the ground up is an option only for the deep of
pocket. Amazon is leasing the former Randall Park
site from Atlanta-based developer Seefried Industrial
