Amazon and Whole Foods: A Logistics Play?

The impact of Amazon’s planned purchase Whole Foods in the CRE world has been discussed at length over the past few months by numerous industry vets. You can find thoughts on what this deal could mean for the retail market from VTS, NREI, and Bisnow. Now that the FTC has given Amazon the official green light, the acquisition has been finalized. Given the growing importance of e-commerce (including fresh grocery delivery) and last-mile distribution centers, many are also predicting the acquisition will ultimately disrupt the logistics market. With 450+ Whole Foods stores located within a stones-throw of some of the nation’s most affluent households, Amazon will be able to expand its reach exponentially — particularly for its Amazon Pantry, Fresh and Go concepts.

A recent event hosted by CoStar Portfolio Strategy highlighted Amazon’s ever-evolving distribution network, and it’s clear that the e-commerce giant has been particularly focused on Delivery Stations and Prime Now Hubs in recent years. For reference, Delivery Stations average 100,000 square feet and are stocked with tens of thousands of items sold on Amazon, which are sorted for last-mile distribution. And Prime Now Hubs are roughly 50,000 square feet and house high velocity, same day delivery items. While large fulfillment centers still account for the majority of Amazon’s distribution infrastructure, according to MWPVL International, Prime Now Hubs, and Delivery Stations represent nearly 5% of active facilities on a per-square-foot basis.

So how does Amazon’s Greater Boston presence stack up? The map below shows the firm’s local distribution network; from a one-million-square-foot distribution and fulfillment center in Fall River to its latest Instant Pickup location near Boston University. Combined, the firm boasts more than 1.5 million square feet of industrial space throughout the metro area. Interestingly, 4 out of 6 Amazon facilities are located within 10 miles of Boston; suggesting last-mile distribution has been a focus here.

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The addition of Massachusetts’ 23 Whole Foods locations to the portfolio provides Amazon with access to a larger swath of the area’s population base. The second map below overlays the grocer’s current locations onto to the e-retailer’s industrial footprint. Many can be found in infill areas, close to Boston and Cambridge. One could argue that Amazon’s last-mile distribution network just expanded exponentially.

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While the full impact of this transaction on the commercial real estate space markets (locally or nationally) has yet to be established, there have definitely been some (positive) implications for the consumer. Reportedly, Amazon is now offering Prime subscribers discounts and other perks at Whole Foods stores, prices have been reduced by as much as 43%, and it looks like you can now buy an Amazon Echo at your local store.

Liz_Berthelette

 

Liz Berthelette is NAI Hunneman’s Director of Research. You can learn more about here on her bio or follow her on Twitter at @liz_berthelette.

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