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Amazon.com Inc. AMZN +2.14% is placing one of its biggest bets yet on the global e-commerce arena. The company is buying into the Middle East with its acquisition of Dubai-based Souq.com, the WSJ’s Nicolas Parasie reports, buying into the region’s small but expanding online shopping market . Amazon didn’t give a value but a banker familiar with the deal said it was worth around $700 million. Amazon has been spending heavily on expanding its global footprint but doesn’t often snap up companies as large as Souq.com. Amazon’s move sets up a potentially fierce battle with regional real-estate billionaire Mohamed Alabbar, who plans to launch a $1 billion e-commerce platform called Noon this spring. Online sales in the Persian Gulf region are still small compared with more mature markets, but Amazon is entering on the cusp of what analysts say will be a period of rapid e-commerce growth.
The drive for warehouse space is hitting record levels in Europe, and the demand can be traced back to Seattle. Amazon has become a major force in a European logistics real-estate sector that is being reshaped by online shopping, the WSJ’s Art Patnaude reports. In the U.K. alone, the Seattle-based online retail giant accounted for nearly a quarter of all warehouse property space leased last year. Experts say the rush by Amazon and others to find capacity is drawing in more real-estate investors. While Europe’s overall commercial real-estate investment fell last year, industrial and logistics volumes rose 7.3% to a record $27.24 billion, says CBRE. The key is the growing demand for rapid delivery as online sales grow in Europe’s dense population zones as well as smaller towns that typically are far from the sprawling distribution centers.
Investment cash seems to be flowing into the logistics sector. Shipping technology startup Freightos raised $25 million in a new funding round led by General Electric Co.’s GE Ventures, WSJ Logistics Report’s Erica E. Phillips writes, the second big infusion this week for a logistics tech operation. The funding for Israel-based Freightos follows a $25 million Series A funding round this week for Silicon Valley startup Turvo, which hopes to use software to make it easier for shippers to track and manage their goods across the supply chain. Freightos wants to use the new cash to expand its booking and pricing-information platform, and provide its software to freight forwarders for their back-office functions. In both cases, investors like the focus on technology in a global business. PitchBook Data Inc. says venture capital money flowing into the logistics sector has grown from $60 million in 2013 to nearly $200 million a year ago.
Freight rail consolidation is underway in North America, but it’s not happening with the major railroads. Mexican mining and railroad company Grupo Mexico SAB is buying Florida East Coast Railway Holdings Corp., the WSJ’s Anthony Harrup reports, in a $2.1 billion deal that will give the Mexican company a 351-mile railway with operations in Florida that reach into the U.S. southeast. Jacksonville, Fla.-based FEC runs trains through the ports of Miami, Everglades and Palm Beach, and has agreements that connect with lines that carry cargo as far as Dallas, Atlanta and Charlotte. Grupo Mexico, which operates Mexico’s Ferromex and Ferrosur railways, says the business will complement its operations in Texas. The acquisition will need regulatory approval before closing, a step that may prove more than a speed bump if the Trump administration flags the deal while it considers negotiating a new North American Free Trade Agreement.
Freight railroads probably shouldn’t load up on new coal car orders just yet. The Trump administration is rolling back President Barack Obama’s signature climate-change policies. But the WSJ’s Cassandra Sweet writes that is unlikely to reverse the U.S. utility industry’s shift to natural gas, solar and wind as leading sources of electricity even if it may extend the life of some aging coal-fired power plants. Cheap U.S. natural gas has prompted many companies to scrap older coal plants in favor of gas-fired plants, which require fewer workers to operate, and many utilities say their investments are being driven by economic as well as regulatory forces. The changing energy picture has had a dramatic impact on freight rail networks, even with double-digit gains in coal traffic this year. Coal shipments were up 15.5% in the first two months of 2017 from last year, but that was still just shy of 30% below the coal volume the railroads hauled five years ago.
“E-commerce is forcing investors to look at logistics and warehousing completely differently.”