How Has Amazon Affected the CRE Market?

SEATTLE—By mid-2018, Amazon was already responsible for roughly 50% of the nation’s e-commerce sales and 5% of all combined offline and online sales, according to Entrepreneur. Earlier this year, US Treasury secretary Steve Mnuchin argued that Amazon is “destroying” the US retail industry, but in reality, how have the rise of Amazon and other e-commerce companies affected the commercial real estate market especially in small and mid-sized markets?

Of course, the answer is a bit more complicated. So believes Doug Misner, SVP/commercial sales leader of TIAA Bank. As a financier of commercial real estate transactions in mid-sized markets, Misner and his team at TIAA Bank are seeing a shift in power from retail properties in these markets to industrial properties that are increasingly being called upon to serve as last-mile logistics centers.

Misner says lenders should evaluate retail opportunities in the current landscape in a variety of ways.

“Many sectors of retail are affected by the online retail trend or Amazon effect, and lenders should carefully analyze deals in a way that insulates them somewhat from this phenomenon. Very few concepts are immune to this. What is being less affected by this trend are concepts in dining and services,” he tells GlobeSt.com. “However, these categories present their own challenges due to the explosion of competitors and market saturation. Overall, lenders should look at location acceptance, concept acceptance and the experience of the operators.”

There are several trends in small/mid-sized markets that industry professionals should be watching, Misner points out.

“Smaller markets tend to decline harder in a recession and recovery more slowly,” he tells GlobeSt.com.  “Investor interest and activity is disproportionately less in smaller markets, and the market data for smaller markets tends to be less robust.”