HAUZ - Industrial REITs: Amazon Cuts Deep

• Industrial REITs - a perennial performance leader in recent years - have been slammed over the past month with declines of 20-30% after Amazon announced plans to cut costs in its logistics network.
• Amazon has pumped the brakes on its aggressive pandemic-fueled footprint expansion amid rising costs and slowing consumer spending, seeking to reduce overcapacity through sublets and renegotiated leases.
• The largest industrial REIT tenant, Amazon still comprises just 3-5% of total occupied space. These overcapacity issues appear to be company-specific as broader industrial vacancy rates remain at record lows.
• The downbeat Amazon report followed an otherwise stellar slate of industrial REIT earnings reports - highlighted by incredible 30% rent growth - and overshadowed several major M&A developments including a potential takeout of Duke.
• We had trimmed our industrial REIT exposure prior to this sell-off given the previously lofty valuations, but the recent carnage is an opportunity to double down on several dividend champions.

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