Prior to the pandemic, there was always a linear relationship between Amazon’s online retail sales growth and its industrial leasing activity, typically averaging 15% to 20% growth annually. 1 The pandemic then fueled an extraordinary rise in e-commerce as consumer shopping habits pivoted. Amazon duly responded with a rampant expansion of its warehouse footprint. In an attempt to control its own delivery network and amass an empire to rival the most dominant logistics companies, Amazon leased an eye-popping 127 million square feet in 2020. This was followed by a further 106 million square feet in 2021. The company effectively doubled its entire 25-year footprint in the space of two years. 2 If Amazon’s first two decades in business sparked a revival of the modern warehouse sector, that 24-month period gave a glimpse into a golden age. While this growth was stratospheric, it was perhaps also rational given the company’s ambition to build an unrivaled logistics system capable of delivering same-day packages to consumers across the U.S. It is clear that such a rate of change in warehouse leasing in such a short space of time was never going to be repeated.Īmazon’s % of U.S. Source: Janus Henderson Investors, BofA Global Research. “Industrial REITS: AMZN news is not new information Industrial is a buying opportunity,”. In 2020, Amazon comprised 14% of overall U.S. industrial leasing, falling sharply to 5.2% in 2021. Year to date, the company’s share of leasing has fallen to just 3.3%, back to levels seen in 2018. Industrial real estate investment trust (REIT) CEOs and leasing brokers have long considered waning leasing demand from Amazon to be old news, claiming that it had been anticipated and penciled into future forecasts. Indeed, REITs gave some indication of their expectations for earnings in 2022 after Amazon’s announcement, providing visibility for their outlooks that was inclusive of a slowdown. It will be important to watch the increasingly uncertain macroeconomic environment closely and monitor whether other users are also looking to sublease space or cease expansion. Could Amazon be the canary in the coal mine for a broader slowdown in industrial demand? It’s possible, though so far there are no signs of it.Īs for Amazon’s immediate intentions, sensationalist headlines that Amazon is canceling leases requires some clarification.
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