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ShipBob fulfillment center in Moreno Valley, California
ShipBob

After ShipBob decided last July to let staffers work from anywhere, the logistics start-up had its landlord erect a wall in the middle of its Chicago headquarters so half the space could be rented out to another company.

On March 1, the office reopened at reduced capacity for socially distanced meetings.

But while it’s using less office space, ShipBob’s real estate needs have been expanding at a breakneck pace. The company, which provides fulfillment services to online retailers, has more than doubled its warehouse count since mid-2020 to 24 locations today, including four outside the U.S., with plans to reach 35 by the end of 2021.

The seven-year-old company is a microcosm of the U.S. commercial real estate market. While office vacancies have soared as employers prepare for a post-Covid future of distributed work, the industrial market is hotter than ever because of a pandemic-fueled surge in e-commerce and increased consumer demand to get more products at Amazon-like speeds.

Vacancy rates in industrial buildings are near a record low and new warehouses can’t get built quickly enough to meet the needs of clothing makers, furniture sellers and home appliance manufacturers. Real estate firm CBRE said in its first-quarter report on the industrial and logistics market that almost 100 million square feet of space was absorbed in the period, the third-highest amount ever, and that a record 376 million square feet is under construction.

Rents rose 7.1% in the quarter from the same period a year earlier to an all-time high of $8.44 per square foot, CBRE said. The firm wrote in a follow-up report last month that prices in coastal markets near population centers and inland port hubs are soaring by double-digit percentages. In Northern New Jersey, average base rent for industrial properties jumped 33% in May from a year earlier, and California’s Inland Empire saw an increase of 24%, followed by Philadelphia at 20%.

“The need to have facilities in these markets, coupled with record low vacancy rates, has often led to bidding wars among occupiers that are driving up rental rates,” CBRE said.

Skyrocketing prices

The wheels were well in motion before Covid-19 hit the U.S. in early 2020. Amazon was already turning next-day delivery into the default option for Prime members, and big box stores like Best Buy and Walmart were racing to add fulfillment space to try and keep pace.

The pandemic accelerated everything. Consumers were stuck at home and ordering more stuff, while physical stores had to go digital to stay afloat.

Grocery delivery added to the market tightness, as Instacart and Postmates were suddenly inundated with orders from customers who didn’t want to enter a Costco, Albertsons or Kroger store. Instacart is now planning a network of fulfillment centers loaded up with cereal-picking robots, according to Bloomberg, and Target has bolstered same-day fulfillment through so-called sortation centers.

In addition to the rapid change in consumer behavior, the pandemic also exposed the fragility of the global supply chain. With facilities in China and elsewhere shuttered, stores experienced dramatic shortages of apparel, car parts and packaging materials.

Retailers responded by securing more storage space to mitigate the impact of future shocks, said James Koman, CEO of ElmTree Funds, a private equity firm focused on commercial real estate.

“The reshoring of manufacturing is gaining momentum,” Koman said. Companies are “bringing more products onshore and need to have room for their products so we don’t fall into another situation like we’re in right now.”

All of those factors are contributing to skyrocketing prices, he said. Additionally, construction costs are higher because of inflation and supply constraints, and companies are building more sophisticated facilities, filled with robots.

“You have these automatic forklifts, conveyor belts, and automated storage retrieval systems,” Koman said. “All this is where the world is going.”

Amazon introduces new robots named Bert and Ernie to fulfillment center operations.
Source: Amazon Inc.

Betting on a long-term need for fulfillment and logistics facilities, ElmTree has acquired about $2 billion worth of industrial space over the past seven months, outpacing prior years, Koman said. He estimates the U.S. will need an additional 135-150 million square feet annually to support e-commerce growth.

For ShipBob, the e-commerce boom has played right into its business model. But competition for space is simultaneously forcing the company to reckon with higher costs.

ShipBob works with brands like perfume company Dossier, powdered energy drink maker Juspy and Tom Brady’s sports and fitness brand TB12, providing a wide network of fulfillment centers for fast and reliable shipping and software to manage deliveries and inventory.

Unlike the retail giants, ShipBob doesn’t go after large football field-sized fulfillment centers, and only has leases at a few of its facilities. Rather, it looks for warehouses that are typically family-owned with 75,000-100,000 square feet and some unused capacity. It then outfits them with ShipBob technology and pays based on order volume and the amount of space it uses.

While ShipBob isn’t signing leases, it is competing for space in warehouses that are now sitting on much more valuable property than they were a year ago. ShipBob CEO Dhruv Saxena said that his company has to be in areas like Southern California and Louisville, Kentucky, a major transportation and logistics hub, despite the rapid increase in prices.

“We have to find ways of placing inventory closer to the end customer even if it comes at a lower margin for us,” Saxena said in an interview late last month after his company raised $200 million at a valuation topping $1 billion.

ShipBob competes directly with a number of fulfillment outsourcing start-ups, including ShipMonk, Deliverr and Shippo. Those four companies have raised almost $900 million combined in the past year.

Not just Amazon

Saxena said a major reason smaller retailers turn to ShipBob is to avoid the costs and hassle of finding fulfillment space and hiring the requisite workers. He likened it to companies outsourcing their computing and data storage needs to Amazon Web Services and paying for how much capacity they use rather than leasing their own data centers.

“The same math applies,” Saxena said. “I can open a warehouse, hire people and rig the software or I can convert those fixed costs into variable costs where I pay on a transaction basis.”

ShipBob employees with CEO Dhruv Saxena in middle
ShipBob

Nate Faust is in the very early stages of building Olive, an e-commerce start-up that’s working with brands to offer more sustainable packaging and delivery options by using recycled boxing materials and bundling items.

Olive opened its first two 30,000 square foot warehouses last year, one in New Jersey and the other in Southern California. Faust, who previously co-founded Jet.com and then worked at Walmart after the acquisition, said if he were entering those leases today, they’d easily be 10% to 15% higher.

Olive isn’t actively in the market for more fulfillment centers and doesn’t face a lease renewal until February, but Faust said start-ups have to be opportunistic. He’s working with real estate firm JLL, which he said is constantly on the prowl for attractive space.

“We have them looking all the time because industrial space is so tight right now,” Faust said. “If we find something perfect for what we’re looking for, it’s not unreasonable to have overlapping leases.”

Olive package
Olive

Vik Chawla, a partner at venture firm Fifth Wall, which invests in property technologies, said the challenges in the real estate market are driving more emerging brands and sellers to the outsourcing model.

“It’s very difficult as a single e-commerce business to try to secure attractive space and run your business,” Chawla said. “The line of people trying to get into industrial buildings is out the door.”

Many tenants occupying that line are traditional big third-party logistics providers (3PLs), like C.H. Robinson and XPO Logistics as well as UPS and FedEx. At the top end of the market, Amazon, Walmart and Target are mopping up space to speed distribution and, in Amazon’s case, to manage fulfillment for its massive marketplace of third-party sellers.

Prologis, the largest U.S. owner of industrial real estate, said in a May report that utilization rates, which indicate how much space is being used, reached close to 85%. Vacancy rates are at 4.7%, close to a record low, the company said.

Amazon is the real estate firm’s biggest customer, occupying 22 million square feet, followed by Home Depot at 9 million and then FedEx and UPS, according to Prologis’ latest annual report. Walmart is seventh.

In April, an analyst on Prologis’ earnings call asked what types of clients were most actively pursuing leases.

“E-commerce is a big component of it, but it’s certainly not all about Amazon,” Michael Curless, Prologis’ chief customer officer, said in response. “Certainly, they’re the most active customer. But we’re seeing a lot of activity from the Targets, the Walmarts, Home Depots, and lots of evidence of the Chinese players making their way to the U.S. and Europe as well.”

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Applied Materials shares sink 10% on light forecast amid macroeconomic uncertainties

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Applied Materials shares sink 10% on light forecast amid macroeconomic uncertainties

The Applied Materials logo on Dec. 17, 2024.

Nurphoto | Nurphoto | Getty Images

Applied Materials shares sank more than 10% in extended trading Thursday as the semiconductor equipment company provided outlook for the current quarter that came in light.

Here’s how Applied Materials did in its third-quarter earnings results versus LSEG consensus estimates:

  • EPS: $2.48, adjusted, versus $2.36 estimated.
  • Revenue: $7.3 billion vs $7.22 billion estimated.

Applied Materials said it expects $2.11 per share in adjusted earnings in the current quarter, lower than LSEG estimates of $2.39 per share. The company said to expect $6.7 billion in revenue, versus $7.34 billion estimated.

CEO Gary Dickerson said that the current macroeconomic and policy environment is “creating increased uncertainty and lower visibility.” He said the company’s China business is particularly effected by the uncertainty.

The Trump administration’s tariffs could double the price of imported chips unless companies buying them commit to building in the U.S. Applied Materials makes tools for chip foundries to physically make chips, much of which currently happens in Asia.

Applied Materials said that it has a large backlog of pending export license applications with the U.S. government, but that it’s assuming none of them will be issued in the next quarter.

“We are expecting a decline in revenue in the fourth quarter driven by both digestion of capacity in China and non-linear demand from leading-edge customers given market concentration and fab timing,” the company’s finance chief said in a statement. He added that it expected lower China business to continue for several more quarters.

Applied Materials reported $1.78 billion in net income, or $2.22 per diluted share in the quarter, versus $1.71 billion or $2.05 in the year-ago period.

The company’s most important division, semiconductor systems, reported $5.43 billion in sales, topping estimates, and representing a 10% rise from last year.

Applied Materials was praised by President Donald Trump earlier this month after it was included in an Apple program to make more chips in the U.S.

Apple said it would partner with the chipmaker to produce more manufacturing equipment in Austin, Texas.

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Intel stock climbs 7% on report Trump administration is considering stake in chipmaker

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Intel stock climbs 7% on report Trump administration is considering stake in chipmaker

Lip-Bu Tan, chief executive officer of Intel Corp., departs following a meeting at the White House in Washington, DC, US, on Monday, Aug. 11, 2025.

Alex Wroblewski | Bloomberg | Getty Images

Intel shares rose 7% on Thursday after Bloomberg reported that the Trump administration is in talks with the chipmaker to have the U.S. government take a stake in the struggling company.

Intel is the only U.S. company with the capability to manufacture the fastest chips on U.S. shores, although rivals including Taiwan Semiconductor Manufacturing Company and Samsung also have U.S. factories. President Donald Trump has called for more chips and high technology to be manufactured in the U.S.

The government’s stake would help fund factories that Intel is currently building in Ohio, according to the report.

Earlier this week, Intel CEO Lip-Bu Tan visited Trump in the White House, a meeting that took place after the president had called for Tan’s resignation based on allegations he has ties to China.

Intel said at the time that Tan is “deeply committed to advancing U.S. national and economic security interests.” An Intel representative declined to comment about reports that the government is considering taking a stake in the company.

“We look forward to continuing our work with the Trump Administration to advance these shared priorities, but we are not going to comment on rumors or speculation,” the spokesperson said.

Tan took over Intel earlier this year after the chipmaker failed to gain significant share in artificial intelligence chips, while it was spending heavily to build its foundry business, which manufactures chips for other companies.

Intel’s foundry business has yet to secure a major customer, which would be a critical step in moving towards expansion and giving other potential customers the confidence to turn to Intel for manufacturing.

In July, Tan said that Intel was canceling plans for manufacturing sites in Germany and Poland and would slow down development in Ohio, adding that spending at the chipmaker would be closely scrutinized.

Under Trump, the U.S. government has increasingly moved to put itself at the center of deals in major industries. Last week, it said it would take 15% of certain Nvidia and Advanced Micro Devices chip sales to China. The Pentagon bought a $400 million equity stake in rare-earth miner MP Materials. It also took a “golden share” in U.S. Steel as part of a deal to allow Nippon Steel to buy the U.S. industrial giant.

Intel shares are now up 19% this year after losing 60% of their value in 2024, the worst year on record for the chipmaker.

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Palantir’s astronomical growth in 3 charts

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Palantir's astronomical growth in 3 charts

Alexander Karp, chief executive officer and co-founder of Palantir Technologies Inc.

Scott Eelis | Bloomberg | Getty Images

Palantir‘s astronomical rise since its public debut on the New York Stock Exchange in a 2020 direct listing has been nothing short of a whirlwind.

Over nearly five years, the Denver-based company, whose cofounders include renowned venture capitalist Peter Thiel and current CEO Alex Karp, has surged more than 1,700%. At the same time, its valuation has broken new highs, dwarfing some of the world’s technology behemoths with far greater revenues.

The artificial intelligence-powered software company continued its ascent last week after posting its first quarter with more than $1 billion in revenue, reaching new highs and soaring past a $430 billion market valuation.

Shares haven’t been below $100 since April 2025. The stock last traded below $10 in May 2023, before beginning a steady climb higher.

Retail investors are a key part of the stock’s strength.

Last month, retail poured $1.2 billion into Palantir stock, according to data from Goldman Sachs.

Here’s a closer look at Palantir’s growth over the last five years and how the company compares to megacap peers.

Government money

Government contracts have been one of Palantir’s biggest growth areas since its inception.

Last quarter, the company’s U.S. government revenue grew 53% to $426 million. Government accounted for 55% of the company’s total revenue but commercial is showing promise. Those revenues in the U.S. grew 93% last quarter, Palantir said.

Still, one of the company’s oldest customers is the U.S. Army.

Earlier this month, the company inked a contract worth up to $10 billion for data and software to streamline efficiencies and meet growing military needs. In May, the Department of Defense boosted its agreement with Palantir for AI-powered battlefield capabilities by $795 million.

“We still believe America is the leader of the free world, that the West is superior,” Karp said on an earnings call earlier this month. “We have to fight for these values; we should give American corporations, and, most importantly, our government, an unfair advantage.”

Beyond the U.S.

The U.S. has been a key driver of Palantir’s growth, especially as the company scoops up more contracts with the U.S. military.

Palantir said the U.S. currently accounts for about three-quarters of total revenues. Commercial international revenues declined 3% last quarter and analysts have raised concerns about that segment’s growth trajectory.

Over the last five years, U.S. revenues have nearly quintupled from $156 million to about $733 million. Revenues outside the U.S. have doubled from about $133 million to $271 million.

Paying a premium

Palantir’s market capitalization has rapidly ascended over the last year as investors bet on its AI tools, while its stock has soared nearly 500%.

The meteoric rise placed Palantir among the top 10 U.S. tech firms and top 20 most valuable U.S. companies. But Palantir makes a fraction of the revenue of the companies in those lists.

Last quarter, Palantir reported more than $1 billion in quarterly revenue for the first time, and its forward price-to-earnings ratio has surged past 280 times.

By comparison, Apple and Microsoft posted revenue of $94 billion and $76 billion during the period, respectively, and carry a PE ratio of nearly 30 times.

Forward PE is a valuation metric that compares a company’s future earnings to its current share price. The higher the PE, the higher the growth expectations or the more overvalued the asset. A lower price-to-earnings ratio suggests slower growth or an undervalued asset.

Most of the Magnificent Seven stocks, except for Nvidia and Tesla, have a forward PE that hovers around the 20s and 30s. Nvidia trades at more than 40 times forward earnings, while Tesla’s sits at about 198 times.

At these levels, investors are paying a jacked-up premium to own shares of one of the hottest AI stocks on Wall Street as its valuation has skyrocketed to astronomical heights.

“This is a once-in-a-generation, truly anomalous quarter, and we’re very proud,” Karp said on an earnings call following Palantir’s second-quarter results. “We’re sorry that our haters are disappointed, but there are many more quarters to be disappointed.”

CNBC’s Gabriel Cortes contributed to this story.

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