Amazon’s property spree may backfire as recession fears rise

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US ecommerce giant could find itself stuck with pricey property ventures as shoppers cut back on spending

An Amazon delivery driver takes an order from a delivery van. Picture: BLOOMBERG/CHRIS RATCLIFFE

Buying land is a major shift for Amazon, which historically relied on a handful of developers to find property, build fairly simple warehouses and rent them back to the company. Now, Amazon is increasingly taking parts of the development process in-house, often bidding against long-time partners for the best space.

“There’s going to be something on the other side of all of this investment for the consumer,” said John Blackledge, an analyst at Cowen and Company. “People will buy more on Amazon when they see they can get it in five hours instead of in two days.” Bezos’s aversion to buying property confounded some Amazon real estate executives, especially as the company matured and its needs shifted, according to people familiar with the matter, who requested anonymity to discuss an internal matter.

The new facilities can be 30m tall or more, are packed with state-of-the-art automation and require lots of electricity. Warehouse developers typically avoid projects that are too expensive and specialised, especially when space in 100-year-old brick warehouses can still fetch a premium in the right location. It’s easy enough to find a new tenant for a simple warehouse, but much harder to re-lease a facility purpose-built to Amazon’s exacting specifications.

For developers, the new strategy makes dealing with Amazon more complicated. Many are hesitant to show the company land they’re hoping to acquire and then lease to the e-commerce giant, fearing that Amazon will decide to try to buy it, according to people familiar with the situation, who requested anonymity because they continue to deal with the company.

 

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