- Blackstone is reportedly in negotiations to purchase 11 warehouses from TA Realty near JFK airport in New York City, according to a report from Crain's New York. The purchase is thought to be part of a larger deal between the two companies in which Blackstone will acquire additional industrial properties nationwide. Neither Blackstone nor TA Realty responded to requests for comment at the time of this reporting.
- The move follows Blackstone's two other recent urban logistics real estate purchases. In March 2018, the firm purchased 22 million square feet of warehouse and distribution facilities across the country from Canyon Industrial Portfolio, which had Amazon, Coca-Cola, DHL and FedEx among its tenants. In June 2019, Blackstone purchased 179 million square feet of logistics assets from GLP, which rents space to Amazon.
- In a statement, Ken Caplan, global co-head of Blackstone Real Estate, said investing in logistics to meet and anticipate growth in e-commerce demand is the company's "highest conviction global investment theme today."
E-commerce companies and logistics firms alike have been on the hunt for urban warehouse space, particularly in New York City. Amazon is steadily gaining ground there, where its current warehousing footprint enables the company's Prime Now service, delivering certain goods to customers in as little as one hour. According to Crain's New York, the company is looking into leasing millions of square feet of additional space in Brooklyn and Queens to create distribution centers for last-mile deliveries.
Buying warehouse space is an opportunity for investment firms to cash in on demand for prime real estate. Not only is space already at a premium in New York City and other urban locales, but accumulating warehouses in one of the country's biggest e-commerce markets, and in Blackstone's case, near a major air freight hub, could be well worth the investment. As e-commerce and logistics firms looking to acquire space in the city, real estate firms are banking on their willingness to pay more rent for a prime location.
In addition to purchasing existing warehouse space in the city, some developers are looking to maximize their leaseable space by building vertically.
Prologis, an industrial developer, is experimenting with multi-level warehouses in New York and other urban centers on the East Coast to cater to the growing needs of firms from Amazon to direct to consumer retail startups. According to a Bisnow report, Prologis expects to be able to charge retail-level rent prices for space in the new facilities, more than traditional industrial rates, as companies favor location over price.
However, there are risks to such a strategy. With warning signs of an impending economic downturn on the horizon, the impact of China tariffs on retail and slowdowns at ports and in the trucking industry, it is possible demand for expensive urban industrial real estate could soften in the future.
That said, the e-commerce and last-mile delivery industries are continuing to expand, potentially warding off those fears for the time being.