What Amazon Means for the Real Estate Market
The purchase was a smart decision on Amazon’s part, given the overlap between their consumer base. Although Whole Foods does not have rivaling retailers who offer competing prices for similar goods, they have a following of customers who tend to rank higher in terms of income and education. Therefore, it makes sense that Amazon would attempt to capitalize this specific clientele given that they are likely to have access to the technology that Amazon utilizes in their e-commerce.
In terms of commercial real estate, the physical spaces of current Whole Foods stores are not the most efficient based upon their size compared to quantity of merchandise. Amazon could shift towards a more compact business model that maintains a similar revenue in a more cost-efficient retail space. Similarly, many of the warehouse spaces for online shopping centers aren’t in the most opportune locations to distribute product to worldwide consumers. A shift could be made in the relocation of Amazon warehouses, stimulating the commercial real estate market.
The customers who shied away from the higher prices at Whole Foods may become more open to the prices that will be designated by the new owner, Amazon. Similarly, it is difficult to estimate how Amazon will merchandise the various dining aspects of Whole Foods, but it could be assumed that the profitability of such services could result in expansion to independent dining options purchased through the real estate industry. However, this does bring into question the impact that this merger will have on smaller chains, or possibly local grocery stores. Although all grocery stores are competing for a large influx of customers, there is hardly any specific overlap between them. This means that there wouldn’t be a huge disruption amongst the real estate market because it is merely setting trends for the possible future of retail.
The shock of Amazon announcing their proposed purchase of Whole Foods has caused quite a stir and for good reason. The retail industry is attempting to take advantage of customer trends, especially in terms of technology, to pave a way for a future that could be much more profitable. For more information about this purchase or the implications for the real estate market, come see us at NAI Isaac. We are a commercial real estate and property manager located in Lexington, Kentucky and serve the surrounding areas. We would be happy to discuss any commercial real estate needs you may have, as well as any concerns about the Amazon merger with Whole Foods.