When Ecommerce Goes Brick and Mortar: Amazon is Using Whole Foods Acquisition

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Recent buzz about Jeff Bezos is that his jump from ecommerce to brick and mortar with the Whole Foods acquisition may be the first step of additional real estate-related deals.

There is no question that Amazon is a disruptive force for brick and mortar retailers and owners of retail real estate. A force less discussed is Amazon’s current and potential impact across the real estate landscape.

Industrial
Outside of retail, the ecommerce giant’s most obvious impact has been on the industrial real estate sector. Amazon’s success in ecommerce and distribution, as well as the success of its peers, has driven strong returns for industrial real estate investors. According to Bloomberg, Amazon is the top occupier of industrial space in the U.S. with 102 million square feet in 258 facilities. Rising consumer expectations for same day and next day delivery could also necessitate more localized real estate demand. This “last mile” demand could drive additional industrial leasing in smaller footprints in the future.

Retail
The last mile challenge has historically constrained the growth of the online grocery business. Amazon’s acquisition of Whole Foods Markets in 2017 was an attempt to gain a broader footprint in more communities and a sign of Amazon’s intention to disrupt grocery retail.

Amazon has also begun testing more brick and mortar retail locations through several concepts. Book stores, Amazon Go, and Amazon 4-star stores. The company’s disruption of retail also has had an interesting effect as some malls are shuttering with plans to develop more residential while other more innovative retailers better meet consumer needs through an omnichannel approach.

Residential
Online residential real estate brokerages are one of the fastest growing startups according to a recent report by Fundera. Amazon could help people buy and sell their homes with offerings including “For Sale By Amazon” signs.

Healthcare
CNBC reports today that Amazon’s senior healthcare leader, Taha Kass-Hunt, spoke recently at a conference where he indicated his team has seen potential in developing artificial intelligence for “prediction and natural language understanding.”

In December, Becker’s confirmed Amazon had hired renowned pharmacist Jason Tzau to improve the company’s healthcare programs and service. CNBC reported in May that Amazon had built a team in its Alexa division to determine how the device may be useful in healthcare. With Amazon’s second headquarters in Arlington, VA, don’t be surprised if new healthcare and pharmacy initiatives are part of their blueprint.

While it is still too early to realize the full implications of Amazon’s healthcare investments for healthcare real estate investors, Bezos is a disruptor. His long term vision could include more industries such as pharmacy and physician services.

As a technology giant, the future of healthcare could be the biggest upside with Amazon’s next move. One thing is for sure, Bezos and his teams are in the process of planning for the first half of 2024. With the sheer size of Amazon, there are bound to be real estate winners and losers.