Amazon, the real estate savior? Up until the last few months, it was thought that the online retail giant was single-handedly causing the destruction of retail malls. But the Amazon Effect (much like the butterfly effect) of leasing/ buying brick and mortar slots and getting into agreements with competitors (to sell their items) is altering the commercial real estate landscape in many different ways now.
Amazon’s Impact on Commercial & Industrial Real Estate
The obvious benefit to online buying on Amazon (through Prime membership) is two-day delivery. However, Amazon has come up with a service called Amazon Lockers. Customers, instead of having the item delivered to their door, can go to the one nearest to them (there are over 1800 of them) and pick up their items. Those big yellow lockers can be found in many retail and strip malls, and helps to alleviate customers concerns about missing the delivery or having the item stolen; also, returns can be made easily by scanning in the receipt and dropping the package in an available locker. One bonus of the locations is that it draws foot traffic- never mind the rent paid to the mall.
Another foray into malls is their Amazon Go supermarket concept. Customers would put their items for purchase in a shopping cart, which would scan the items, and payment is charged towards the customers’ Amazon account. There is only one Amazon Go open right now, but there are plans to open about 2,000 stores (although for the immediate future, they plan to roll out 20 over the next two years) which would be a boon to mall landlords. However, it remains to be seen what will become of Amazon Go with the Whole Foods acquisition.
The Whole Foods purchase (for $13.7 billion, including debt and still needing regulatory approval) gives Amazon an immediate brick-and-mortar presence. The fifth-largest grocer in the country (with about 460 stores in prime shopping-center locations) merging with the online beast contradicts what Amazon has been known for in the commercial real estate industry- the bringer of death to malls and retailers. Amazon has not spelled out the plans for Whole Foods at this time, but these locations may be used as distribution centers for fresh food items available for same-day delivery.
Of course, the industrial real estate industry loves Amazon. They have almost 80 high-tech distribution centers across the country, which take up an incredible amount of warehouse space- with their corresponding rents. As Amazon continues to grow, they will need more of these distributions centers.
A lifeline was handed to Sears when Amazon decided to sell the struggling retailer’s Kenmore products line. Amazon, up until the agreement, did not sell those big (refrigerators, washers/ dryers) home appliances. Sears has obviously been struggling, with up to 20% of their stores shuttering over the past year and a half- much of it due to Amazon. For the time being, Sears will handle delivery and set-up as if the customer is purchasing from the store; however, there is talk of Prime shipping for those items, but the logistics would have to be worked out between the two companies.
Amazon has been the bane of retail real estate over the last decade, but it seems that a great change is happening to the e-commerce giant. The Amazon Effect is going to alter, for the better, all facets of the industrial and commercial real estate industry.
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