Amazon: Prime tenant that draws a high price
That shows in the CommercialEdge Industrial database, where Amazon has 3.8 million square feet under development at a Philadelphia center, as it does at similarly large sites in Austin, Texas; Detroit; Syracuse, New York; and Little Rock, Arkansas.
They're also going for top dollar, the CommercialEdge data shows, at an average $145 per square foot compared with $94 for all such properties sold in the past 16 months. The highest price cited in the report was $332 per square foot – or $74 million – for a 223,000-square-foot warehouse in Los Angeles.
By the way, that Philadelphia project is just one of 14 by Amazon in that metro alone as the company expands its real estate footprint by 50% from 2019 to 2020 and now owns more than 800 warehouses across the country, as our Laura Agadoni writes here: "Amazon Doubles Warehouse Space in Philly: What Investors Should Know."
And all across the land, "Investors are … eager to acquire properties fully leased by Amazon, given the stable income it provides for the long term," the report says.
The Millionacres bottom line
The easiest way for investors to get on the Amazon real estate bandwagon is probably through real estate investment trusts (REITs) that lease to the mammoth company. One good example is Duke Realty (NYSE: DRE), which derives nearly 10% of its annual net effective rent from Amazon alone.
Industrial REITs -- of which distribution centers are a major subset -- have been solid performers through the pandemic, and that may well be likely to continue as e-commerce continues to build on the gains it made during the pandemic.
The CommercialEdge report says that online shopping claimed more than 17% of core retail sales in the first quarter of this year, compared with 13.7% prior to the pandemic. And its authors don't think that's a blip.
"We will keep a close eye on e-commerce figures during the waning days of the pandemic, but we believe the heightened shift to online retail is structural rather than temporary," they write.