Buyers are willing to pay up for warehouses with Amazon as a tenant.
A hedonic pricing analysis on the US logistics market shows that when one controls for factors such as property location, size and age, investors will pay a premium of around 8% for an Amazon-let property.
This premium equates to approximately a 45 bps difference in yields, based on current market averages.
“The existence of such a premium is not a surprise: the scale and nature of Amazon’s business mean their warehouses are always going to be sought after in the current investment climate, which prioritizes secure income in sectors with positive tailwinds. This is unlikely to change for the foreseeable future,” a report from Real Capital Analytics said recently.
To buttress its assertions, the report cited Real Capital Analytics data that last year a record number of single-let Amazon-tenanted properties were traded in the US (63) and in Europe (26). Combined, these transactions totaled $6.5 billion, or just under 6% of everything spent on warehouses in these markets through mid-last month.
The strong attractiveness of Amazon was also cited recently by CommercialEdge. “When it comes to e-commerce, there is Amazon and then there is everyone else. Between the behemoth’s direct sales to consumers and third-party sales through its platform, it is by far the dominant force in online retailing. Even as other companies, like Walmart, surpassed it in e-commerce growth in 2020, they are still playing catch-up.”
For industrial properties, a CommercialEdge report said Amazon is driving investment sales volume as investors are also eager to acquire properties fully leased by the e-commerce giant, given the stable income it provides for the long term.
The report noted nationwide, Amazon distribution centers will account for 8 of the top 10 largest industrial projects underway in the US this year, with a total footprint of 28.3 million square feet—an area about the size of New York City’s Central Park.
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