From Wearhouse to Warehouse-The Battle Over Industrial & Shopping Center Wasteland

The Economist May 30th 2020 pp60 Shumpeter|”The warehouse king” “Why industrial wasteland is the new battleground for property giants”

Stanford graduate, Hamid Moghadam, lost $5M on Webvan an online grocer that went belly-up and he turned down an opportunity to invest in Amazon-which was then just books. Since the financial crisis of 2007-2009 he co-founded AMB, unloaded shopping center assets and “bought millions of square feet of warehouse space on the tarmac of American airports instead”. In 2011 “he led a bumper deal to unite AMB and Prologis, a bigger rival, with a combined $46B of owned and managed assets”. They currently own as much space as “Manhattan-an-a-half” or 1B square feet globally valued at $125B.

Blackstone is also big in this space with 850M square feet and a war-chest of $45B targeted for acquiring similar property. With the rise of eCommerce demand for warehouse continues to grow and now with the pandemic property prices are falling and some predict “A battle over industrial wasteland”. Properties like London’s Lea Valley, “an idyll of canal boats and riverside vegetable gardens running from the graffiti-covered East End to the capital’s north. Prologis bought the largely shuttered Ravenside Retail Park for $68M and hopes, with attrition of the remaining clients, to covert the space into “a multstorey warehouse for e-commerce firms like Amazon. This appears to be a global trend-converting dead shopping centers and industrial buildings in to warehouse.

These firms believe that the e-commerce demand and low inventory will ensure stable rents. Demand stems from a rise in e-commerce-firms and that these companies need large spaces to stock a wide array of items. Prologis also “wants to burnish the industry’s image” by being solar, being surrounded by green space and having space dedicated to “storage, light manufacturing, creative industries, a gym and a coffee shop”. With the likelihood of extended high unemployment they hope these jobs in “alluring” spaces will be attractive.