Amazon's Warehouse Space Cuts Centered On Smaller Buildings In Secondary Markets
Amazon has been closing dozens of logistics centers this year, and its strategy for determining which buildings are on the chopping block is coming into focus.
Nearly two-thirds of the 48 Amazon distribution centers across the states that are available for other companies to lease are 150K SF or smaller, per a CoStar analysis of sublease offerings this year.
The listings are in addition to the millions of square feet of construction Amazon has delayed or canceled this year. In all, Amazon has some 7.8M SF on the sublease market across the country, according to CoStar.
While 13% of Amazon's distribution space is in facilities larger than 1M SF, none of those buildings are on the sublease market, per CoStar data. By contrast, 14% of its footprint is in buildings smaller than 50K SF, but those make up 31% of the sublease listings.
Marc Wulfraat, head of logistics consultant MWPVL International, told CoStar that it is likely that the company is trying to avoid inefficiencies but getting rid of small space that can be handled by larger locations nearby.
Amazon is reportedly laying off about 10,000 people this week, as it looks to trim costs. The cuts come right on the cusp of the holiday shopping season, and will largely impact people involved with Amazon’s voice assistant Alexa as well as its retail and human resources departments, The New York Times reports.
The adaptation of its logistics center has been underway for some time now. In 2021, Bisnow reported that it was moving away from leasing its space, to becoming a developer-owner of its own logistics real estate. This summer, it was clear that it was purchasing land to assist in that strategy, reportedly spending more than $2B on property acquisitions in the two years preceding.
However, it is also correcting its course after massive expansion during the pandemic, Wulfraat said on Bisnow’s podcast this month.
“They started opening up buildings at almost an irrational pace in 2020 and 2021, especially in the United States,” Wulfraat said. "In some cases when we were updating the database, we were looking at the map and saying, 'Well, some of this just makes no sense.' Putting a delivery station, brand new, right up beside another one they already operate."
He said Amazon is still on pace for a "spectacular" year, but it overshot the mark on its network expansion.