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Amazon’s pursuit of faster shipping may mean an even larger presence in Connecticut.
The digital retail giant has been leasing and buying property throughout Connecticut for the past few months, increasing its local network and contributing to an already thriving industrial real estate market, according to experts.
“The industrial real estate sector has been and will remain one of the best sectors in Connecticut in 2020,” said Bruce Wettenstein of Westportbased Vidal Wettenstein. “Everybody wants (things) immediately. For these distribution companies, the last mile is crucial because the product will go to the main warehouse and then get unloaded and shipped … to southern Fairfield County and then there it gets distributed to the home or business and it will be within the day.”
Amazon announced in November that it would open a 200,000squarefoot delivery
station in Stratford this year, complementing its orderfulfillment centers in North Haven and Windsor, a sorting center in Wallingford, a delivery station in Bristol and an “air hub” adjacent to Bradley International Airport.
Amazon also has another lease in Newington for about 40,000 square feet in a former Sears warehouse that it announced in December.
The Seattlebased company could not be reached for comment for this article, but has said in past interviews that it invested more than $1 billion in the state between 2010 and 2018 on infrastructure and employee compensation.
The company’s growing footprint is on pace with national trends brought on by changing
consumer demands, according to industry experts.
“We’re moving from twoday shipping, to oneday shipping, and I believe the next step will be sameday shipping or pickup,” said Professor Jose Mendoza, who has a doctorate in business administration and teaches a number of marketing courses at the Jack Welch College of Business and Technology at Sacred Heart University.
As companies continue to shorten their order delivery time, Mendoza predicted that online retailers would continue to drive demand for warehouse and distribution space nationally in coming years.
“It’s very difficult to offer sameday delivery or pickup unless you have a presence, and I think this is something that companies like Amazon are understanding,” he said. “It makes sense for them to open delivery
stations in key locations because you can get closer to the customer.”
A 2017 study conducted by the CBRE Group found that for each incremental $1 billion in growth in ecommerce sales, the industry would need an additional 1.25 million square feet of distribution space to support the growth.
Amazon reportedly earned $239.9 billion in sales in 2018 and is on pace to surpass mark based on its quarterly earning reports from 2019.
The company hasn’t released its full year numbers yet.
Supply, demand and development
On a larger stage, Amazon’s growing acquisitions may mean more competition for limited space and a chance that who moves into an industrial area becomes a contest between big
money and local needs.
“The economy is still churning, and the industrial market looks to be what’s pushing it,” Wettenstein said. “There is still a severe lack of highbay ... modern industrial buildings with columns wider than 30 or 40 feet on center.”
Fairfield County’s industrial sector had less than 10 percent of its total industrial real estate inventory available for lease prior to Amazon’s Stratford facility announcement, according to a market data from Lincoln Property Company.
Similar data from Cushman and Wakefield found that central Connecticut — specifically New Haven and Hartford — had only 7.3 percent of its inventory available.
“If they are taking up existing inventory, they are competing for space with other businesses and users,” said Jeff Ryer, principal at
Ryer Associates Commercial Real Estate in Danbury.
Space demands from local companies may not rival Amazon’s 100,000squarefeet orders, but the company’s lease in Newington falls within the space range of smaller companies, which could strain some other, smaller, companies looking for warehouse space.
According to Ryer, Amazon’s demand for specific facility requirements may lead to new development, much like it did for its fulfillment centers in Windsor and North Haven.
“(Amazon has) fairly unique requirements, as far as a high ceiling goes, and very stringent, as far as loading, so there may be properties that don’t quite fit what Amazon wants and wouldn’t be affected by it,” Ryer said.