DC Velocity - April 2012

Amazon.com buys Kiva Systems

Amazon.com Inc. announced on March 19 that it would acquire Kiva Systems Inc., the North Reading, Mass.-based maker of robotic order fulfillment technology, for $775 million in cash, adjusted for the assumption of stock options and other items. The deal is expected to close in the second quarter of 2012.

Kiva’s bright orange, lozenge-shaped “bots” are managed by complex control software and carry shelves filled with merchandise to order pickers. The company counts such retailers as Staples, Walgreens, Saks Fifth Avenue, Crate & Barrel, and Diapers.com among its customers.

Amazon’s interest in Kiva stems from its desire to improve productivity “by bringing the products directly to employees to pick, pack, and stow,” said Dave Clark, Amazon.com’s vice president, global customer fulfillment, in a statement.

Amazon and Kiva are not strangers to each other. Kiva’s technology is used by Quidsi Inc., parent of Soap.com and Diapers.com, which Amazon acquired last year. The orange bots also had been in use at Zappos, acquired by Amazon in 2009. (Zappos reportedly has since stopped using the Kiva system at its Shepherdsville, Ky., DC.) “I’m delighted that Amazon is supporting our growth so that we can provide even more valuable solutions in the coming years,” said Kiva CEO and founder Mick Mountz in announcing the deal.

For Kiva, the key word is
“growth.” Accelerating its
expansion clearly has been a priority for the past two
years, and Kiva has reshuffled its senior management
to reflect that goal. In 2010, the company hired Amy
Villeneuve as president and COO. In late 2011, Kiva let
go five of its vice presidents. In November 2011, one
of Kiva’s board members told The Boston Globe that
the company wanted to exceed $1 billion in revenue,
and that some of the executives “were not the right
contributors to scale to the next level” of growth.
Kiva’s strategy seems to have paid off. The company
has added customers across multiple industries, but
especially in online retailing and apparel. Last year, it
relocated to new headquarters and nearly doubled its
employee base. It recently opened an office in Europe
and achieved an ISO 9001 quality certification in order
to be eligible for European business. ;
—Toby Gooley

go figure …

2.1% / 2.3%

FedEx Corp.’s projections for U.S. GDP growth this year and next. The forecasts are below economists’ consensus estimates.

SOURCE: FEDEX CORP.

Prologis co-chief: Warehouse
rents poised for big increase

Warehouse rental rates are poised for a significant increase due to a tightening of supply and an increase in global demand for space, according to one of the top two executives of the world’s largest industrial property developer.

Walter C. Rakowich, co-chief executive of Prologis Inc., told the International Warehouse Logistics Association (IWLA) in mid-March that an aging warehouse network will render a growing number of facilities obsolete and unusable. In addition, the growth of global trade will increase the need for distribution center space in both established and emerging markets, he said.

In his keynote address at the group’s annual conference, Rakowich said market occupancies are rising, and the industry would need to add as much as 75 million square feet in warehousing capacity merely to replace obsolescent space.

“Customer sentiment is bullish, investors are driving up values, and rents are poised to grow,” he said.

The specter of increasing rents should be balanced by the fact that rents fell substantially during the 2008–09 recession, according to Rakowich. He said current asset values are roughly 80 percent of their pre-recession peaks.

Obsolescence is driven by a variety of global factors, he said. For example, much of the warehousing space in fast-growing Asian economies was never configured for distribution, but for manufacturing.

“There’s a tremendous opportunity for development,” he said. He pointed to Canada and Brazil as nations that are ripe for development of DC space.

San Francisco-based Prologis, which last year completed a merger with AMB Property Corp., has $43 billion of assets under management and investments in 600 million square feet of distribution facility space in 22 countries across four continents. Prologis is “cautiously optimistic” about its prospects this year, Rakowich said. ;