by Dan Rafter
How important has Amazon been to Midwest commercial real estate? The latest capital markets report from Avison Young identifies Amazon as one of the country’s two industrial super tenants, the tenant that every city and county wants setting up shop in its borders.
The second industrial super tenant? Avison Young points to FedEx, which it identifies as a close second to Amazon in its name cache rankings.
The numbers from both of these powerhouses are impressive. Amazon’s growth during the past five to seven years has created more than 6 million square feet of new industrial space in the Midwest states of Wisconsin, Missouri and Illinois, according to Avison Young.
“The presence of Amazon.com in an owner’s distribution space provides the stability and long-term growth potential that investors crave,” said Erik Foster, an Avison Young principal and leader of the firm’s national industrial capital markets group.
Amazon and FedEx facilities tend to sell for higher values, Avison Young said. According to the company’s research, Amazon and FedEx buildings sold on average for two to four times the U.S. Treasury rate in recent years. The Treasury rate is often used as a barometer of investment return. This spread, then, between the Treasury rate and cap rates is proof that a cache tenant such as FedEx or Amazon brings added value.
Amazon gets most of the headlines today. But FedEx, with its longer track record, is also a star tenant in the distribution sector. Avison Young reported that since 2005, FedEx Ground has expanded or relocated more than 500 facilities. During the past two years, the company has built 12 distribution centers across the country, according to Avison Young’s report.