Retail giants like Amazon and Costco, believe they have found a way to give a boost to their e-commerce activity, and also save money: owning the warehouses where they store goods.
Most retailers tend to rent the stores where they sell the products, but more and more of them have calculated that they will make money in the long run, and will also gain more control, if they purchase the warehouses where they store goods and distribute it to online customers.
The 25 largest retailers in the U.S. purchased an area of about 3.5 million square feet that were leased last year, up from 1.7 million square feet the year before, according to CoStar Group, which deals in commercial real estate information. This is the highest number in the last ten years.
Amazon is the largest corporate owner of industrial space in the United States, with 78 buildings covering an area of 7.7 million square meters, according to Real Capital Analytics. Walmart, Target, Kruger and Dollar General have also acquired industrial space in the past year. .
Some businesses buy land in order to combat the shortage of inventory created due to the bottlenecks in the supply chain. Companies want as large an inventory as possible in stores, which requires more storage space to support it.
“These assets are essential for the purpose of bringing goods into the country and shipping them within the customer supply chain,” says Juan Arias, a senior consultant at CoStar.
A kind of long-term investment
Many retailers also have record cash levels, and are eager to spend it on properties like real estate, similar to the way large high-tech companies purchase office space.
And by purchasing the ordering and distribution centers, retailers are also investing. Industrial real estate has in recent years become one of the sectors with the best performance in the US real estate markets, as companies are building e-commerce activities to meet the demand from buyers.
The value of industrial assets has risen by 39% in the last 12 months, compared to a 20% increase in all commercial real estate during this period, according to the October report by Green Street, an information analysis company.
The 25 largest retailers owned 14.4 million square feet of industrial space by the end of 2020, an increase of more than five times the situation a decade ago, according to CoStar. Retailers still rent about three times as much of this area, but the gap is narrowing.
Costco has 1.1 million square feet of industrial space, almost double what it had five years ago, says CFO Richard Galanti. Last May, Costco paid $ 345 million to purchase a 150,000-square-foot facility in Ontario. In California, a move that expanded its distribution system on the west coast of the United States and allowed it to better handle imports from Asia.
Traditionally, the company has owned most of its distribution centers because it has a lot of cash, Galanti says. Last month, the company announced that its cash and cash equivalents totaled $ 11.26 billion, an increase of 34.3% over the same period in 2019.
“Through ownership and control [על הנכסים] We feel we can provide the best service at the best price to our customers, ”Galanti said.
Businesses usually own the distribution centers where most of their inventory is for online trading. The investments made by the companies within these centers, which are usually about 90,000 square meters, in the form of equipment and robots, usually exceed the amount invested in the real estate itself, says Chris Bjorsen, who heads the task force for industrial real estate, at the real estate services company Jones Lang LaSalle.
The retailers who own the facilities typically look at them as a long-term, 30-50-year investment, while those who rent them look at 5-15-year ranges, Bjorsen says.