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Amazon Best Positioned to Serve Surging E-Commerce Demand

With covid-19 prevention measures accelerating e-commerce adoption among consumers, retailers offering one-stop shopping and efficient delivery – such as Target, Walmart, and Amazon – are seeing strong online sales. CoStar data reveals Amazon is all but certain to retain its standing for highest online sales.

Amazon’s head start in building out its online delivery platform is a major advantage now and in the longer term. With 180 million square feet of distribution facilities in the U.S., Amazon is ahead of its next closest major competitor, Walmart, at 140 million square feet, while Target trails both with less than 60 million square feet.

Amazon maintains three fulfillment centers in the Denver metro area, with a 2.4 million-square-foot location in Thornton, a 1 million-square-foot location in Aurora, and a new 123,000-square-foot operation in Loveland’s Centerra development. It also operates a software-development office at 1900 15th St.

Amazon expanded its delivery operation by investing heavily in large distribution facilities early on, and more recently, by focusing on smaller in-fill properties. With plans to add over 10 times more distribution space to its platform in the next couple of years, Amazon is expected to continue to outpace its competitors in terms of merchandise sales per square foot.

With the U.S. industrial market poised to add 200 million square feet of new logistics space in 2020, 30 percent of which will be absorbed by Amazon, what effect will this have on the industrial market? 

Most properties absorbed by Amazon in the next few years will be in California, Florida and Texas, placing many of the metros in these states as short-term beneficiaries of e-commerce demand. Southern and western markets, like Dallas-FW, Austin, Atlanta, San Antonio, Inland Empire, Tampa and Denver should continue to garner e-commerce space demand as these markets have significant and growing e-commerce buying power.

According to CoStar, tight market conditions suggest Amazon will continue to pay a premium for the space it leases. As the e-commerce giant continues to absorb well-located, and pricier, last-mile assets, which it has done since 2015, it will continue to pay a higher rent premium. In fact, the gap between overall national logistics rents and the average rent Amazon pays will continue to widen in 2020 from the 50 percent premium paid by Amazon today. By the end of 2020, Amazon is expected to absorb over 100 delivery stations with construction delays pushing some deliveries into 2021.

 

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