A slowdown by Amazon is a boon for others in the warehouse sector, especially for procurement of materials, according to industry sources.<\/p>\n
Last month, Amazon announced plans to shed at least 10 million square feet of warehouse space after reporting slow growth and a weak profit outlook that it attributed to overbuilding, according to Bloomberg<\/a>.<\/p>\n As the e-commerce giant hits the brakes on expansion, that should translate to shorter lead times for currently scarce materials such as roofing components, roofing insulation, bar joists, precast and steel, said Tom Belanich, industrial director at Messer Construction, a Cincinnati-based general contractor. Other materials that might become more available include warehouse dock equipment, HVAC equipment and electrical equipment, said Belanich.<\/p>\n \u201cWhen Amazon was ramping up, extremely active and building new facilities, the lead times for those materials began to stretch further and further out,” said Belanich. “Then, obviously, the demand for those went up significantly, which caused the price to go up.\u201d\u00a0<\/p>\n Now, Amazon hitting the pause button on its warehouses should have the opposite effect.\u00a0<\/p>\n \u201cWhen you reduce the demand for those things, certainly it\u2019s going to improve the lead time and we should start to see some easing of the cost implications for those materials also,\u201d Belanich said.\u00a0<\/p>\n Charles Byerly, CEO Of Westport Properties, an Irvine, California-based owner and operator of self storage, multifamily and industrial properties across the U.S., said the slowdown by Amazon will undoubtedly free materials up for other new development.<\/p>\n \u201cWhen you look at roof trusses as an example, those have been six to 12 to 18 months [out], depending on exactly what they are,\u201d said Byerly, and noted that Amazon’s slowdown “is certainly going to put priorities in different buckets other than just Amazon\u2019s, because everybody was fighting for that bucket.\u201d<\/p>\n Amazon went on a massive spending splurge during the pandemic in order to capitalize on booming demand for e-commerce and home delivery. In some cases, Amazon bought everything in production<\/a> for months, putting significant pressure on an already strained supply chain. That was further exacerbated when contractors turned to hoarding materials<\/a> earlier this year.\u00a0<\/p>\n Amazon was the largest builder of warehouses over the last three years, totaling $10 billion, or about 6% of the total construction activity, according to Dodge Data & Analytics.\u00a0<\/p>\n But including projects built specifically for Amazon by developers like NorthPoint Development and others, Amazon\u2019s market share jumps to around 13%, said Dodge Chief Economist Richard Branch during a construction outlook webinar<\/a>.\u00a0<\/p>\n Amazon is \u201csuch a large player in this market that if they start pulling back on construction activity, it will pull the market down with them,\u201d Branch said, referring to overall warehouse starts. While that means the warehouse sector could slow as well, a pullback is welcome in other ways.<\/p>\n That’s because an Amazon slowdown has positives beyond just material availability, said Bob Smietana, vice chairman and CEO of HSA Commercial Real Estate, a Chicago-based national full-service commercial real estate firm. The land market should ease as well.\u00a0<\/p>\n \u201cWith one of the big players in space allocation for distribution real estate in the U.S. slowing down, for some of us that\u2019s actually good news,\u201d said Smietana. \u201cIt\u2019s going to eliminate some additional competition.\u201d<\/p>\n Even if warehouse starts slow as a result, there’s still plenty of work to go around.\u00a0<\/p>\n For example, Brian Sudduth, president of Miller Construction Co., a Fort Lauderdale, Florida-based general contractor, said there is still enough demand in Florida and that the projected Amazon pullback hasn’t affected its outlook. In fact, Miller\u2019s warehouse backlog in 2023 is greater than what it had coming into this year.<\/p>\n \u201cI don\u2019t see [a slowdown] here in central South Florida,\u201d said Sudduth. \u201cWhen you add in all the other industrial developments that have happened throughout the state, it hasn\u2019t resulted in a slowdown.\u201d\u00a0<\/p>\n Prologis, a San-Francisco-based REIT that invests in warehouses, also still sees room to grow in warehouse development. Non-Amazon customers in the first quarter of 2022 accounted for 85% of new e-commerce leases, up from 66% in 2020, according to a Prologis report<\/a>.\u00a0<\/p>\n At the same time, commercial real estate consultancy CBRE forecasts 850 million square feet of leasing in 2022, down from the record of 1 billion square feet in 2021.\u00a0<\/p>\n But if that projection becomes reality, it would still be the second-highest leasing year on record.\u00a0<\/p>\n Similarly, Smietana said HSA Commercial\u2019s outlook on the sector remains strong.<\/p>\n \u201cIn the markets that we\u2019re in, we\u2019re still seeing projects going forward and spaces getting leased,\u201d said Smietana. \u201cMaybe that ends up being reduced a little bit, but we\u2019re still embarking on new projects.\u201d<\/p>\n This item was originally posted here: Read More<\/a><\/p>","protected":false},"excerpt":{"rendered":"