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The warehouse development industry is viewing Amazon’s profit warning as a possible sign of the end of a good run. George Hammond reports for the Financial Times:
Fears that the Amazon-propelled boom in ecommerce is running out of steam have wiped billions off the value of the world’s biggest warehouse owners in recent days, reversing some of the huge gains made by the sector during the pandemic.
A profit warning from Amazon on Thursday evening triggered steep share price falls, providing an indication of how much warehouse owners rely on the ecommerce group as a customer for space and a bellwether for sentiment.
The UK’s largest listed warehouse operators, Segro and Tritax Big Box, fell between 7 and 8 per cent when the market opened on Tuesday morning. New York-listed Prologis, the biggest warehouse owner in the world with a market capitalisation of more than $110bn, has plunged more than 10 per cent since Friday morning.
Mike Prew, an analyst at Jefferies, said in a note that Amazon’s caution about online sales growth was tempering warehouse developers’ optimism about the profits they could make from developing new space.
Amazon accounted for a quarter of all new warehouse demand in the UK in 2020 and 2021 as it invested heavily in new capacity to capitalise on a jump in ecommerce sales during the pandemic, according to estate agency Savills.
But in the first quarter of this year, it accounted for just 3 per cent of the overall take-up of space, said Savills.
Brian Olsavsky, Amazon’s chief financial officer, said on Friday that the company had overextended and its aggressive expansion would slow.
That was a blow for warehouse companies and raised concerns for speculative developers that are building record amounts of new space to cater for expected demand in the sector.
Estate agent Cushman & Wakefield estimated that a record 27mn sq ft of warehousing was being developed this year — more than double last year’s 12mn. The bulk of the space under construction has not been let.
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