Fears that the Amazon-powered e-commerce boom is running out of steam have wiped billions of dollars off the value of the world’s biggest warehouse owners in recent days, undoing some of the huge gains made by the sector during the pandemic.
An Amazon earnings warning on Thursday evening triggered a sharp drop in the share price, providing an indication of the extent to which warehouse owners rely on the e-commerce group as a customer for the space. and a sentiment indicator.
The UK’s largest listed warehouse operators, Segro and Tritax Big Box, fell 7-8% at the market open on Tuesday morning. New York-listed Prologis, the world’s largest warehouse owner with a market capitalization of more than $110 billion, has plunged more than 10% since Friday morning.
Mike Prew, an analyst at Jefferies, said in a note that Amazon’s caution about growing online sales was tempering warehouse developers’ optimism about the benefits they could reap from developing new spaces.
Amazon accounted for a quarter of all new UK warehouse demand in 2020 and 2021 as it invested heavily in new capacity to capitalize on a surge in e-commerce sales during the pandemic, according to estate agency Savills .
But in the first quarter of this year, it only accounted for 3% of overall space occupancy, Savills said.
Brian Olsavsky, chief financial officer of Amazon, said on Friday that the company had overextended and that its aggressive expansion would slow.
It has been a blow to warehouse businesses and has raised concerns for speculative developers who are building record amounts of new space to meet expected demand in the sector.
Real estate agent Cushman & Wakefield estimated that a record 27 million square feet of warehouses were under development this year, more than double last year’s 12 million. Most of the space under construction has not been leased.
In the UK, the proportion of overall retail sales made online doubled from pre-pandemic levels to a peak of 38% in January this year, but had fallen back to 26% by March, according to the Office. for National Statistics.
“The market is not blind to the fact that consumer confidence is down and that trading next year will be more difficult,” said Richard Evans, head of logistics and industry in the UK. at Cushman & Wakefield, adding that rising inflation and the cost of living crisis were likely to weigh on consumer confidence.
Nonetheless, he expects demand to remain above the long-term average as supply chain disruption in the wake of Covid-19 has prompted many businesses to hold more inventory, rather than rely on “just in time” delivery.
Russia’s invasion of Ukraine added to the tension.
This has meant a wide variety of businesses looking for new space, according to Kevin Mofid, head of logistics and industrial research at Savills, who said demand hit an all-time high in the first quarter of the year. .
“We had a record first quarter by far and Amazon was 3% of that. There’s a lot of demand in the marketplace that isn’t Amazon,” he said.