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Amazon Looking To Lease Distressed Retail For Its Expanding Grocery Play

Amazon is ramping up its efforts to lease retail real estate for its in-the-works physical grocery store concept, which will be larger than existing Amazon Go cashierless stores and carry a wider variety of merchandise.

Amazon has inked agreements-in-principle with an unidentified REIT for "dozens and dozens" of leases nationwide, S&P Global reports, citing Brick Meets Click Chief Architect Bill Bishop.

Bishop reportedly said a REIT board member had confirmed the development to him.

In such a scenario, Amazon would presumably be negotiating from a position of even more strength, considering the stress that the retail market is under because of the coronavirus pandemic. Many big-box locations were vacant even before the crisis.

Late last year, Amazon kicked off its effort to develop larger grocery stores (apart from Whole Foods), signing as many as 12 leases in the Los Angeles area and targeting other sites in Chicago and Philadelphia. 

The first of its new-line grocery stores, in Woodland Hills, California, is in a 35K SF space vacated by Toys R Us. The store opened earlier in April, but not as a conventional grocery store. Instead, it is being used temporarily to fulfill online orders, CBS reports.

Amazon remains committed to developing a physical presence, Amazon Senior Vice President of Global Corporate Affairs Jay Carney said on Wednesday during a Walker & Dunlop webcast.

Carney did not specifically address the growth of its non-Whole Foods grocery stores. He also said the pandemic will not change shoppers' appetite in the long run for physical stores.

"We've invested heavily in physical retail in recent years," Carney said. "The customer wants physical and online. The successful retailer will meet customers where they are."

Regular Amazon deliveries by drone are also coming, he said, though sooner in some countries than others, depending on regulatory structures.

"We're working closely with regulators, and we're pleased with our progress," Carney said. "I don't have an update on timing, except to say that it will happen. Customers are going to want this service, done well, so that it's unobtrusive. Once it becomes normal, people will be surprised they were ever worried about it."