How Do Amazon Fulfillment Facilities Impact Their Surroundings?

When it comes to ecommerce — and especially superior last-mile efficiency — no one comes close to Amazon. The Seattle-based giant currently operates nearly 350 facilities — including fulfillment centers, Prime hubs, and sortation centers — around the country, and regularly announces plans for continued industrial development.

But as new Amazon fulfillment centers pop up left and right — increasingly in urban and suburban areas, as opposed to the rural and industrial areas of yesteryear — it’s worth looking into the knock-on effects these centers have on nearby commercial real estate (CRE) activity. To that end, we’ve used Reonomy’s proprietary datasets to get an idea of how Amazon facilities in San Bernardino, CA, Phoenix, AZ, and Columbus, OH, changed the local CRE landscape — consistently increasing property values and sheer volume of transaction.

San Bernardino, California

Six years after it first announced plans to open a facility in San Bernardino, Amazon now operates eight distribution and sortation centers clustered around the 950,000-square foot flagship. Amazon’s workforce in the Inland Empire — the arid region east of Los Angeles encompassing Riverside and San Bernardino Counties — has ballooned to 15,000 strong, including nearly 5,000 workers in the city of San Bernardino itself.

Amazon’s arrival on the scene had a marked effect on a variety of CRE asset classes. Office sales were low from 2009-2011, but spiked 320% when the announcement was made in 2012 and continued increasing through 2015. Every year from 2012-2015 saw at least a 100% increase in comparison to 2011 office sales.

Similarly, commercial sales in general increased exponentially in the area after the announcement of the center, with annual sales more than tripling from 2011 to 2014. Further, though Amazon doesn’t deserve full credit, its investment in San Bernardino was likely a major factor in the area’s mean sales price for industrial assets jumping from $6.4 million in 2012 to $16.7 million in 2015 (the median sales price jumped from $4.1 million to $7.6 million, as well).

Phoenix, Arizona

Back in 2007, Amazon announced plans for its first facility in Arizona, a 600,000-square foot fulfillment center located ten miles due west of Downtown Phoenix at 6835 West Buckeye Road. The company’s press release explained that the fulfillment center would create as many as 300 full-time jobs and between 1,000 and 1,300 seasonal positions.

Just over a decade later, Amazon operates three fulfillment centers, a sortation center, and a Prime hub within Phoenix city limits, and employs more than 6,000 full-time workers in the Phoenix Metro Area.

In terms of real estate, the Buckeye Road facility had a particularly pronounced impact on general commercial properties: sales within a two-mile radius of the fulfillment center increased 240% from 2008 to 2012. A second fulfillment center located three miles east of the Buckeye Road facility at 5050 West Mohave Street had a similar effect when it was opened in 2014, only on office space. From 2014 to 2016, sales of office spaces doubled within a two-mile radius of the Mohave Street facility, as did the median sales price for such assets (from $1.3 million to $2.6 million).

Columbus, Ohio

Located just south of Columbus city limits, Amazon’s 1,000,000-square foot fulfillment center in Obetz, Ohio, commenced operations in July 2016. The Obetz facility and the nearby fulfillment center in Etna, Ohio, collectively employ more than 2,000 Ohioans, and have laid the groundwork for Amazon’s recently-announced West Jefferson facility, its sixth in Ohio and its third in the greater Columbus area.

While it’s still too early to make grand proclamations about the impact of the Obetz fulfillment center on local CRE, it’s worth pointing out that the mean sales price of CRE assets as a whole increased from $8.6 million in 2016 to $10.4 million last year — possibly a sign of things to come.

Looking Forward

The rise of ecommerce is already forcing — and will continue to force — retailers into new modes of operation. CRE professionals who are perceptive enough to figure out what these new modes of operation mean for their own business will be best-positioned to come out on top as we move forward.

For brokers and the investors they work with, this means watching Amazon’s facilities development like a hawk, leveraging the technology needed to capitalize on related opportunities, and evolving their business to stay one step ahead the competition.

The views expressed here are the author’s own and not that of ALM’s Real Estate Media Group. Rich Sarkis is the CEO of Reonomy.