Axios Pro: Retail Deals
June 24, 2022
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1 big thing: E-commerce has space for space

Photo illustration of Hamid Moghadem, CEO of Prologis, with an image of a shopping cart and abstract shapes.
Photo illustration: Allie Carl/Axios. Photo: Prologis

The pandemic pushed brick-and-mortar retailers to jump on the e-commerce bandwagon fast — but even as that slows, fears that retailers are pulling back on their warehouse space are premature, Prologis CEO Hamid Moghadam tells Kimberly.

Why it matters: Investors have been trying to read the tea leaves on whether Amazon could be a bellwether for the rest of the e-commerce space. The giant spooked the market in April with its decision to cut back on its warehouse space, and sublease 10 million square feet.

  • Moghadam, who runs one of the largest warehouse operators in the world, says leasing demand is still strong and points in the other direction.
  • He says that Amazon expanded unusually fast in 2020 and 2021 and likely overshot its objectives. But Amazon has continued to grow, and "this is just a blip,” he adds.

Catch up fast: Prologis agreed to acquire Duke Realty last week, adding another 160 million square feet of space in 19 major U.S. logistics markets to its 1 billion square foot global network.

  • Prologis is focused on M&A and shrewd acquisitions, “but really our focus is on the customers, operating the business, being in good markets, developing more assets for our customers,” Moghadam says.

Between the lines: Warehouse space is an extremely fragmented business, with the majority of the market in the hands of companies that have a few properties, he says. He expects to see those businesses continue to consolidate or grow.

State of play: While the pandemic was a boost for e-commerce, it also disrupted supply chains and upended the way businesses think about their inventories.

  • Retailers' need for more resilient supply chains gives Prologis and others like it an opportunity to step in. "Tight supply and turbocharged demand is going to continue to make for a really good market in the foreseeable future," he says.

What to watch: AR, VR and the improvement of the customer experience online should really help drive e-commerce penetration further, he says. Returns have cost retailers billions of dollars. This will help solve that, he adds.

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