Malls Fill Vacant Stores With Server Rooms

Malls Fill Vacant Stores With Server Rooms (Wall Street Journal, Nov 3, 2014):

The Internet is moving to a shopping center near you.

In Fort Wayne, Ind., a vacated Target store is about to be home to rows of computer servers, network routers and Ethernet cables courtesy of a local data-center operator. In Jackson, Miss., a former McRae’s department store will get the same treatment next year. And one quadrant of the Marley Station Mall south of Baltimore is already occupied by a data-center company that last year offered to buy out the rest of the building.

As America’s retailers struggle to keep up with online shopping, the Internet is starting to settle into some of the very spaces where brick-and-mortar customers used to shop. The shift brings welcome tenants to some abandoned stretches of the suburban landscape, though it doesn’t replace all the jobs and sales-tax revenue that local communities lost when stores left the building.

Venyu Solutions LLC, a data-center operator that is renovating the former department store in Jackson, sees more opportunity for conversion because of sheer amount of distressed retail properties. “Who else wants them?” said Brian Vandegrift, the company’s executive vice president of sales. “You’re not competing with people in substantial businesses who want those spaces.”

Many malls and neighborhood shopping centers are still grappling with vacancies five years after the recession. The average mall vacancy rate hovers around 5.8%, according to market researcher CoStar Group, the same level as in the third quarter of 2009. Strip-mall vacancy sits at 10.1%, down from 11.5% five years ago. Rents are down too. Asking rents at malls have fallen 16% over the past five years, while strip mall rents declined 12%, according to CoStar.

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