A Look into Amazon's Acquisition of Whole Foods

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The Amazon acquisition of Whole Foods is big for a lot of reasons: it could be a game-changer in the grocery industry, it's a smart play by Amazon, and Whole Foods needed the deal. Yet what does this massive merger mean beyond the grocery aisle – specifically for real estate investment? We looked into the big business deal on the block this week and how it might shake down for investors.

The basics of the Amazon/Whole Foods acquisition is that Amazon bought Whole Foods for a reported $13.7 billion dollars, according to an article that recently appeared in the Chicago Tribune. According to data from the Wall-Street Journal, Amazon will acquire Whole Foods' 440 stores and 11 regional distribution centers. Amazon has elected to cut the oft-cited high prices at Whole Foods, a recent Bloomberg stat quoting by as much as 43%. By bringing their successful and streamlined processes, Amazon expects to improve Whole Foods' practices as well. Amazon needed the physical “brick and mortar” presence to fit the final piece in the puzzle of their own grocery game; the convenience they're already known for could easily extend to the drudgery most of us would love to avoid with the weekly trip to the grocery.

How does this big deal appeal (or not) to real estate investment? It isn't a clear-cut picture, and time will certainly tell. One upside is that real estate investors do not want stores standing empty and the presence of Amazon/Whole Foods brick-and-mortar stores are a bonus. This deal will have a large quantity of urban/suburban real estate locations bustling with pick-up as well as shopping, which demonstrates physical stores are sticking around. The grocery business is rocky; locally in Indiana alone you can drive past several shuttered Marsh grocery stores - just in the Indianapolis area. Stores like Walmart and Target are at the top of the grocery game, with the Amazon/Whole Foods deal hoping to break ground in a new direction.

There are opportunities in real estate investment – as long as investors play it smart. This acquisition will cause others in the grocery industry to adjust their own operating plans as they try to keep pace with the new course set by Amazon/Whole Foods. As the consumer moves away from a long Saturday trip meandering through the aisles to a quick drive-through pick-up, more grocers will move to keep up or risk losing business altogether. According to a piece in the National Real Estate Investor investors should take heart because those properties that are anchored with grocery properties tend to be more stable. By analyzing what they have in their portfolio, as well as which grocers they think will modernize their practices to stay current and retain customers, investors can be satisfied after the Amazon/Whole Foods deal...even if it upsets the apple cart in the grocery industry.

 

Elizabeth Wheeler