3 Ways Amazon is Shaking up CRE
American consumers have been the beneficiaries of Amazon’s ability to target technology in ways that provide more convenience to their customers. For users craving more instant deliveries and experiential shopping, these changes mean better, faster customer experiences. For commercial investors, tenants, and landlords, they mean more opportunities for positioning your assets to a wider audience.
These changes are reflected in the CRE sector as the need for physical assets to support e-commerce grows. Here are 3 ways Amazon is shaking up CRE.
#1: AmazonGo and the Acquisition of Whole Food’s Impact on Grocery
Amazon has crept into virtually every consumer industry except for the grocery sector.
Mainly because consumers generally don’t trust Amazon to be able to deliver fresh fruits and vegetables without a local physical presence, Amazon has not competed with grocers until now.
By acquiring Whole Foods over the summer, Amazon has secured more than 460 physical stores throughout the country to pull off on-demand local delivery of fresh produce. Already in the experimental phases, AmazonFresh and AmazonGo are all going to force traditional grocery giants like Kroger, Wal-Mart, and regional grocers to offer their own on-demand service.
For CRE, that means increasing demand for local assets that can serve as ship-from-store distribution centers within the last-minute-mile.
#2: Need for Distribution and Warehousing’s Impact on industrial
The biggest impact being felt by Amazon in the CRE industry is in the industrial warehousing sector. Big warehouses and old industrial plants are proving to be ideal locations for fulfillment centers and massive distribution and sorting facilities for online retailers.
In addition to regional warehouses, Amazon’s creative plans for utilizing smaller assets within city limits as part of their down chain supply will have a dramatic effect on all CRE. More businesses will have to compete with Amazon on more turf including fashion, entertainment, grocery, and retail. Having an inside track on local assets that are best positioned to compete with Amazon will prove to be most valuable for investors, landlords, and tenants in CRE.
#3: E-commerce technology’s Impact on Industrial Design
Current and future technology being employed by Amazon is having a huge effect on tenant expectations and investor demands for industrial design that can readily support e-commerce. Most think of drone technology which is only in beta right now and will likely continue to face regulatory hurdles before becoming mainstream. Yet there are other technologies shaking up CRE.
Tenants today are looking for buildings that can support future technology as well as current technology. Right now, sensor technology is being utilized in warehouses and distribution centers to speed up sorting and distribution of goods.
Soon, those technologies will be coupled with artificial intelligence that can stack shelves, pick orders, and sort inventory – something Amazon is already doing. Buildings will need to come equipped to handle the load necessary to support Smart technology. When it comes to technology’s impact on industrial design, every CRE sector is affected from office to retail and the more technologically advanced the asset, the more marketable it becomes.
By Micah McCullough, CCIM, SIOR