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The Wall Street Journal: E-Commerce Mania Spreads To Warehouse Market

According to The Wall Street Journal:

E-commerce is setting off a scramble for industrial real estate near urban centers, giving landlords of once-unglamorous properties a chance to push up rents to record levels.

Amazon.com Inc. and other online retailers, as well as fulfillment companies such as FedEx Corp. , increasingly are seeking out “last-mile” locations in urban areas to feed consumer demand for ever-faster delivery of their purchases.

That, in turn, is giving landlords of such facilities pricing power they have never enjoyed before.

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When a company is shipping to individual customers rather than in bulk to stores, most of their costs are in transportation and labor, and reducing them is a priority, said Eric Frankel, an analyst at real-estate research firm Green Street Advisors. Warehouse rent, by contrast, represents just 5% or so of costs in a supply chain.

”If you think about sales productivity across the entire supply chain, paying a high rent is not a big deal,” said Mr. Frankel.

Modest levels of new warehouse supply are coming onto the market at a time when some e-commerce companies are expanding rapidly. Amazon is now the largest tenant of Prologis, Duke Realty Corp., Jones Lang LaSalle, Income Property Trust and DCT Industrial Trust by percentage of rental revenue at year-end 2016, according to S&P Global Market Intelligence.

To read the full article from the Wall Street Journal, click here.