Situs Newswatch 10/30/2017

Amazon: The Tipping point of E-Commerce in the US
(The below piece is excerpted from the Situs RERC and Urban Property Australia report, Australian Real Estate Trends – Amazon the Disruptor)The New York Times reported the first online retail transaction in 1994 when a Philadelphian bought a CD over the internet. The same year, Jeff Bezos incorporated his company, which opened its virtual doors on the World Wide Web at Amazon.com in 1995. AuctionWeb, now eBay, was founded in 1995, too.

While Amazon focused primarily on selling books when it started, the company soon expanded to housewares, electronics, toys, and many other items. Bezos always viewed his company as a technology company rather than a retailer, and to his point, Amazon has truly grown from its humble start as a book seller to a tech giant. With the acquisition of companies such as Whole Foods Market Inc. and its market innovation, Amazon is set to define the future consumer marketplace. The rise of Amazon as a powerhouse is the perfect example of a marriage of retail and industrial industries, technology and logistics.

How Big is E-commerce in the US?
Accordig to the Federal Reserve Bank of St. Louis, e-commerce retail sales averaged about 8.1 percent of total US sales in 2016, compared to about 0.9 percent in 2000. Likewise, the National Retail Federation (NRF) predicts that non-store/online will grow 8-12 percent in 2017, about three times faster than the growth rate of the overall retail sector. E-commerce and players such as Amazon will be crucial to the future growth of retail. While in-person sales are still important, capitalizing on e-commerce and finding creative shopping experiences will be increasingly important as well. For example, Nordstrom recently announced that it will roll out smaller stores with no merchandise, instead providing services such as manicures and on-site tailoring. And, traditional e-retailers, like Warby Parker and Rent the Runway, have started opening “showrooms” that allow consumers to try on products without large inventory.

The rise in e-commerce fueled by players such as Amazon also means an upsurge in the demand for industrial assets and a dwindling demand for retail space. At the year-end 2016, Amazon alone leased more than 97 million square feet and owned more than 2 million square feet of industrial space, such as fulfillment and data centers, in North America (US, Mexico, and Canada).

Amazon Changes the Industrial and Retail Landscape
The industrial sector is benefiting from the exponential growth in e-commerce and “last mile” delivery. The growing demand and limited supply for space in cities will support rent growth and, hence, investors’ interest in the sector. Most of the warehouses and distribution centers are near large population centers, such as Atlanta, Chicago, Northern New Jersey and Houston. However, with companies like Amazon promising same-day deliveries, the demand for smaller fulfillment centers in urban locations will increase. A recent report suggests that e-commerce requires three times as much space as other warehouse uses because of the way inventories are placed and dispatched. Hence, industrial assets will remain in high demand as e-commerce gains a larger foothold.

To read the full Situs RERC and Urban Property Australia report, please click here for your free copy.

Trump Is Leaning Toward Powell for Next Fed chair, but Remains Undecided
President Donald Trump is leaning toward naming Jerome “Jay” Powell as Fed chair but remains undecided, a source told CNBC.

For weeks, Powell has been considered the front-runner for the job as the president considers who will steward the central bank when current Chair Janet Yellen’s term expires in February. However, the competition has turned into a derby in which various candidates have moved to the front only to get pushed back in the wake of news developments.

Powell, a current Fed governor, has the advantage of presenting Trump with a chance to break from the Yellen Fed yet maintain many of the same policies that have kept the stock market rally intact and interest rates low.

“If Trump believes Yellen’s approach is best for keeping market levels growing, he is going to seek a Fed chair who can carry on her mantle but under the Trump brand. The best non-Yellen Yellen is Powell,” Beacon Policy Advisors said in a report Friday morning.

Powell was appointed to the Fed in 2012 to fill an unexpired term that won’t end until 2028. He has emerged as a compromise candidate as Trump considers reappointing Yellen or moving to a starker alternative like Stanford economist John Taylor, who would be expected to push for higher rates and a faster reduction in the Fed’s $4.5 trillion balance sheet.

read more: CNBC

Lord & Taylor-WeWork Deal Is Good Way to Use ‘Less Productive’ Real Estate
Hudson’s Bay Co.’s deal to sell Lord & Taylor’s flagship New York City store to WeWork in a transaction is a good way for the company to monetize its real estate, analysts say, but the company is facing other challenges.

The deal, valued at $850 million, involves the Fifth Avenue store Lord & Taylor has occupied since 1914, which will continue to operate as a smaller store, but WeWork will use most of the 12-floor space for its headquarters and other office space.

Lord & Taylor is part of Canada-based Hudson’s Bay Co.’s retail portfolio, which also includes Saks Fifth Avenue.

The deal comes as the retail landscape is filled with too much square footage, and companies like Macy’s Inc., Gap Inc. and others are downsizing.

read more: Marketwatch

Borrowers, Lenders See Continued Stability for CRE Financing
Commercial real estate borrowers remain bullish on the financing climate despite some uncertainty about where financial regulation is heading and the specter of increasing interest rates.

Exclusive research from NREI’s latest finance survey shows that confidence remains high that the good times are likely to roll a bit longer.

A majority of survey respondents expect capital sources across the board, from banks to life insurance companies, to have the same, if not more, debt capital available in 2018. Respondent views were fairly evenly split on which sources were likely to have increased capital allocations. Local and regional banks (26.7 percent) and life insurance companies (26.5 percent) were identified by respondents as the two sources most likely to increase allocations n 2018.

On a scale of 1 to 10, respondents also identified local and regional banks (6.9) as the most significant source of capital to the commercial real estate sector. That segment was followed by national banks (6.4) and life insurance companies and institutional lenders (5.6 each).

read more: NREI

Jeff Bezos Is Set to End Friday as the World’s Richest Person
Jeff Bezos is on track to become the richest person on the planet.

Amazon.com Inc. shares surged Friday, lifting its founder’s net worth by $7.8 billion to $91.3 billion as of 10 a.m. in New York, according to the Bloomberg Billionaires Index. The stock climbed 10 percent to $1,070.59, after the retailer reported results that beat Wall Street estimates. If the share gains hold through Friday’s close, Bezos will top the index for the first time.

His wealth briefly surpassed that of Microsoft Corp. co-founder Bill Gates on an intraday basis on July 27, but Amazon shares ended the day lower, leaving Bezos at No. 2.

Gates ended Thursday with a net worth of $88 billion, $4.5 billion ahead of Bezos on the Bloomberg index, a daily ranking of the world’s 500 richest people. Gates, 61, has been the world’s richest person since 2013.

Bezos also led the way on a morning that lifted the fortunes of some of the richest technology billionaires in the U.S. by a combined $17 billion. Alphabet’s Inc.’s Sergey Brin and Larry Page, and Microsoft’s Steve Ballmer all added more than $2 billion in the first 30 minutes of trading. Facebook Inc.’s Mark Zuckerberg added $2.1 billion. Gates, who has sold most of his Microsoft stake, added $600 million.

read more: Bloomberg

Walmart’s Future May Involve Digital Voice Assistants and VR Shopping
When you think of Walmart, you probably think of the big-box retail stores that are sprinkled from coast to coast. It’s the biggest retailer in America, with more than 4,000 brick-and-mortar locations.

But Marc Lore, CEO of Walmart’s e-commerce division, sees a very different future for the brand — one built around high-tech solutions and data-driven efforts that go way beyond the traditional ways of gathering consumer information. For one thing, Lore believes that voice-activated devices are going to be an important way to gather knowledge.

“Voice is the next big way for us to be able to leverage data from a person’s car, home, or device,” he said Thursday at Fast Company’s Innovation Festival. “It will allow them to shop in a very conversational way with a robot, in the same that they would with a specialist on a showroom floor of a retailer. And that robot will know you as well as your mom or dad.”

Lore joined Walmart last year after the company acquired Jet.com, the e-commerce shopping club he founded in 2014. Rather than launching another startup, he headed up Walmart’s digital strategy. This has involved acquiring some interesting brands, such as Bonobos, Modcloth and Moosejaw.

Having built his career in e-commerce, Lore is very familiar with gathering customer data and using it to deliver more personalized products and services. This isn’t something that everybody is that excited about. Fabletics co-founder Kate Hudson, who shared the stage with Lore, says it might take time for consumers to adapt to engaging with robots rather than people.

read more: Fast Company

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