Industrial owners and brokers reacted to the news that Amazon is moving toward owning more of its distribution network, which Bisnow first reported, with a mix of concern and defiance at Bisnow’s Northeast Industrial and Urban Logistics event Wednesday.
“We’re seeing them actually pull out of these potential lease engagements in a number of cities,” Wharton Equity Partners founder and Chairman Peter Lewis said at the event, held at the Passaic Logistics Center in New Jersey. “I think you have to be leery if you’re engaging with Amazon today in lease discussion. Don’t bank anything on that they are going to show up at closing.”
Amazon has made up roughly half of the industrial leasing market in recent years, Lewis said, so a change in its real estate behavior is sure to have cascading effects across one of the hottest asset classes in commercial real estate — but the true impact of its change is still unknown.
“We’ve leased a lot to Amazon over the years, as a lot of guys have. That change, I think, it’s gonna be felt fairly soon,” Lewis said. “If they start now becoming their own [landlord], you know, they can control their own ecosystem — buying it and leasing it — it’s going to have an impact.”
The cracks in a relationship between Amazon, industrial’s most prolific tenant, and the property owners it has leased space from has emerged in recent months, leaving some of the landlords it planned to lease with in a lurch, real estate players told Bisnow in October.
“I don’t know Jeff Bezos. He’s a pretty aggressive guy, a bright guy,” industrial broker Hugh Williams told Bisnow last month. “If you recognize you’re doing billions of dollars worth of real estate around the world every year, maybe you think to yourself, ‘Why don’t I just do that? Why don’t I own that?’ It makes sense to me.”
Amazon has been a key driver in the industrial real estate leasing boom that began when the coronavirus pandemic hit. It opened 175 warehouses from January to September 2021, The Wall Street Journal reported, and opened 250 new spaces in 2021. In September, it announced it would open an additional 100 locations, but it hasn’t discussed how many of those would be leased, rather than owned.
At the end of 2020, it leased more than 285M SF of nonoffice and retail real estate across North America, according to its annual report, compared to 8.4M SF of owned space.
For those reaping the benefits of the massive expansion, a world where Amazon is an owner rather than a tenant prompts questions about whether the rapid price appreciation for industrial assets — which reached 39% for the 12 months ending in October, according to Green Street — will continue, speakers said.
“I’m calling these buyers when things are hitting the press, and I’m saying, ‘You still feel bullish even with Amazon saying this?’” said TerraCRG partner Dan Marks, who brokers industrial investment sales. “You see an announcement like that, and you think, OK, is this it? Is it over? Is the party over? Is the demand gonna stop?”
Amazon declined to comment on Bisnow‘s report last month beyond a statement from a spokesperson saying, in part, “There is no one-size-fits-all approach to meeting our real estate needs.”
The rise in demand for industrial space has spread far beyond Amazon, Marks added, which has given warehouse developers confidence the bull run in the market will continue.
“The tenant market is a lot deeper than everybody thinks it is,” Marks said. “It’s not just Amazon.”
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