Real Estate Shows How Amazon Won 2020

If you want to see what a transformative year 2020 was for Amazon’s e-commerce business, don’t just look at its share price — look at its real estate decisions. 

Black Friday shopping mall foot traffic was down 52%, according to Sensormatic Solutions, but online sales were up 22%, data from Adobe Analytics showed. COVID-19 has turbocharged the move toward online retail, and so Amazon’s real estate take-up has also accelerated dramatically. 

To zero in on one of its largest markets, where good data exists, Amazon leased 14M SF in the UK this year up to the end of November, according to Savills. That is more than three times its take-up in 2019 and almost twice as much as its previous annual high, the 7.9M SF it leased in 2016.

When it comes to online retail, Amazon is the market as far as real estate is concerned. Savills data showed the company accounted for 82% of all e-commerce leasing in 2020 and 30% of the total logistics markets. 

It is signing long leases or buying sites freehold, meaning it is making investments in space for the long term, betting that demand will extend beyond the immediate impact of the coronavirus pandemic.

“Amazon has been a clear beneficiary of the situation we’re in,” Savills Head of Industrial and Logistics Research Kevin Mofid said. And the likelihood is it isn’t done yet.

“There are a number of verticals it hasn’t troubled yet: It sells clothing, but not in a big way, then there is pharmacy and areas like grocery,” Mofid said.

Indeed, last month, Amazon announced it would be expanding into the pharmacy sector, which could involve major new space requirements for the company. 

Mofid said retailers in general won’t have a clear idea of their ongoing logistics and warehousing real estate needs until 2021.

“A lot of retailers remain in crisis mode and are running to stand still,” he said. “Grocers for instance have seen a huge increase in online deliveries, but they have fulfilled that from stores. Retailers want to get Christmas out of the way, then next year you will see a reorganisation of supply chains as they work out how to do it more efficiently.”

Amazon already has that giant supply chain in place, and it is likely to keep growing. Here is the data behind how the company expanded exponentially in 2020.