How the “Amazon Effect” is changing real estate

After courting the Fall River area for more than a year, dirt is moving on Amazon’s 1-million-square-foot distribution center in the South Coast Life Sciences and Technology Park, which is the latest and biggest in a string of deals that Amazon has made in Massachusetts. The 77-acre parcel was purchased from the Fall River Redevelopment Authority, with NAI Hunneman’s Mike DiGiano and Cathy Minnerly representing the land owner.

Amazon's site cleared at the Science & Technology Park at Fall River.

Amazon’s site cleared at the Science & Technology Park at Fall River.

The deal will be transformative for the gateway city of Fall River, and speaks to the “Amazon effect.” Outside of Massachusetts, the online retailing behemoth is changing the landscape of commercial real estate on a global scale. Headquartered in Seattle, Amazon’s impact on the local office market is unrivaled and even the Greater Boston area is feeling the effects. Locally, Amazon entered the metro’s office market in 2013 and now occupies more than 130,000 square feet of office space between two buildings. The majority of this space is located in Cambridge at 101 Main Street and there’s roughly 20,000 square feet located at 8 Technology Drive in Westborough.

Amazon is also turning the global industrial market on its head. In just five years, the firm’s warehouse footprint has more than doubled in the U.S. alone — surpassing 40 million square feet in 2015. Continued growth in e-retailing and digital shopping has led to two major trends in warehouse demand: the proliferation of modern, mega distribution centers (in excess of 1 million square feet) and greater demand for smaller, urban warehouses. Both of these trends are playing out within the Boston metro.

With a 305,000-square-foot distribution center at 1000 Technology Center Drive in Stoughton (former Reebok space) and Kiva Systems (an Amazon-owned robotics company) occupying 209,000 at 300 Riverpark Drive in North Reading, Amazon has already made a splash in the local industrial market. The latest 77-acre deal will result in a new distribution center will initially employ 500 people and eventually reach nearly 2,000 during peak seasons.

As demographic trends continue to shift in the U.S., with Generations X, Y and Z becoming an increasing larger share of the total population base, so will consumer behaviors. Ultimately, customers are increasingly seeking more digital shopping options, shorter delivery times and faster service. Retailers, including Amazon, are reacting to these changing patterns. In Q3  this year the firm leased 96,000 square feet at 201 Beacham Street in Everett — likely to bring its Prime Now concept, which offers customers deliveries in as little as 1 hour, to Boston.

Amazon’s continued expansion into the metro, mainly in Boston’s industrial market, bodes well for future commercial real estate demand and local job growth.

Amazon Chart

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