Amazon.com's latest move—to anticipate what you want to buy and start shipping it before you even buy it—could be a big boon to a sector that is already seeing huge gains. Industrial warehouse space, once a dud in real estate, is now closing in on prom queen status, as more retail goes online and as the housing market recovers.
"Amazon is at the forefront of a larger trend that has seen demand for well-located logistics centers, very close to major urban centers increase sharply," said Sam Chandan of Chandan Economics. "It's some of the best performing space that we see in commercial real estate right now, across all property types."
Warehouses are the strongest prospect for both investment and development in 2014, according to the latest PWC Investor Survey. Two thirds of respondents deemed warehouses a "buy."
"That's the highest of all the real estate food groups," said PWC partner Mitch Roschelle. "The online retailers have struggled to figure out how to get the goods closer and closer and closer to where the people live."
As Amazon starts moving its products closer to its customers, others will likely follow suit, meaning more need for those smaller distribution centers that are closer to major metropolitan areas.
"They [Amazon] are probably the most creative and forward-looking people in this space, and seeing this type of thing doesn't surprise me," said Jack Cuneo, CEO of Chambers Street Properties. "It's a great model, so you're going to see more people emulating what they do and more need on their part for space."
Chambers Street, a real estate investment trust based in Princeton, N.J., owns six Amazon fulfillment centers, three in the United States and three overseas. While these are larger properties, Cuneo says a system like Amazon is proposing might move the retailer out of some of the larger facilities and into smaller ones.