Amazon’s Outsized Impact on Industrial
“When it comes to e-commerce, there is Amazon and then there is everyone else.”
Amazon is leading the competition for fulfillment centers and last-mile delivery locations, and the e-commerce behemoth is also pushing the new supply pipelines as developers scramble to complete large facilities.
“When it comes to e-commerce, there is Amazon and then there is everyone else,” notes a recent report from CommercialEdge on the state of the industrial sector. “Between the behemoth’s direct sales to consumers and third-party sales through its platform, it is by far the dominant force in online retailing. Even as other companies, like Wal-mart, surpassed it in e-commerce growth in 2020, they are still playing catch-up.”
Many of the largest spaces in the CommercialEdge Industrial database include an Amazon lease, including the 3.8 million square foot LogistiCenter at I-95 Wilmington, which is currently under development in Philadelphia. Similar facilities are underway in Austin, Detroit, Syracuse, and Little Rock. And nationwide, Amazon distribution centers will account for 8 of the top 10 largest industrial projects underway in the US this year, with a total footprint of 28.3 million square feet—an area about the size of New York City’s Central Park.
Amazon is also driving investment sales volume for the industrial sector: “investors are also eager to acquire properties fully leased by Amazon, given the stable income it provides for the long term,” the report notes.
Since the beginning of last year, buildings with Amazon as a tenant accounted for 7% of all sales volume, and those deals are trading at a premium average of $145 per square foot (versus an average of $94 per square foot). This is true even in smaller markets, where Amazon facilities are selling at “astronomical prices”: the 1 million-square-foot 1835 US Route 9 in Albany sold for $125 million, or $125 per square foot. And in bigger markets, prices are pushing even higher: 10 Edison, a 900,000-square-foot building in Central New Jersey, recently traded for $247 million, or $274 per square foot, and the 223,000-square-foot 20730 Prairie St. in Los Angeles recently sold for $74 million, or $332 per square foot.
CommercialEdge also predicts the e-commerce push for industrial space will only continue to grow. Q1 2021 data shows that e-commerce accounted for 17% of core retail sales; pre-pandemic, e-commerce had a 13.7% share of the market.
“We will keep a close eye on e-commerce figures during the waning days of the pandemic, but we believe the heightened shift to online retail is structural rather than temporary,” the report notes.