Sources: Amazon, which has too much warehouse capacity after the pandemic, is looking to sublet over 10M square feet in New York, California, and elsewhere
Amazon.com Inc., stuck with too much warehouse capacity now that the surge in pandemic-era shopping has faded …
BloombergSpencer Soper
Context & Ripple Effects
Amazon spent the pandemic building at a pace no retailer has matched: it added more than 450 US warehouses after the end of 2019, doubling its fulfillment network past 930 facilities. With delivery demand normalizing, that footprint is now oversized, and this report shows the first big attempt to monetize the surplus rather than just absorb it.
Amazon converts fixed lease obligations into recoverable cash across New York, California, and other markets, cutting carrying costs on space built for pandemic-era order volumes that have since faded.
Tenants in those industrial markets suddenly gain access to large blocks of modern, immediately available fulfillment-grade space from a single motivated sublessor.
Second-order effects
Sublet inventory competes directly with landlords' new leasing in the same metros, pressuring industrial rents and giving third-party logistics operators and rival retailers a cheap path to capacity they would otherwise have had to build.
Amazon's pullback shifts bargaining power toward tenants in negotiations with warehouse developers, who now face a visible example of a mega-tenant shedding space.
Third-order effects
If the cycle holds — overbuild, shed, then re-expand, as the later $15B facility plan suggests — logistics real estate becomes a swing market driven by e-commerce demand forecasts, with brokers and sublease markets absorbing volatility that used to sit on retailers' balance sheets.
The trend: E-commerce giants are treating warehouse capacity as a flexible portfolio to expand and shed with demand cycles rather than a permanently owned network, making industrial real estate a shock absorber for retail forecasting errors.
Wonder if the lease agreement will have something like a non-compete because it feels that the perfect tenant is going to be in a very similar business. https://twitter.com/...
Amazon, stuck with too much warehouse capacity now that the surge in pandemic-era shopping has faded, is looking to sublet at least 10 million square feet of space and could vacate even more by ending leases with landlords. https://www.bloomberg.com/...
So much for the hottest sector (maybe the ONLY hot sector) in commercial real estate. If $AMZN needs to unload space, so do a LOT of e-commerce companies. https://twitter.com/...
One asterisk: “huge” for any real human looking at a building, and for most companies. But maybe a few percentage points of Amazon's gargantuan real estate footprint
Probably the strongest indicator that people think the softening economy is more than a temporary blip or because of reopening/war. ☹️ Amazon, stuck with too much warehouse capacity, is looking to sublet at least 10 million square feet of space https://www.bloomberg.com/...
While @Amazon is looking to reduce 10 Million square feet of warehouses, according to this article, note this is around only 2% of their overall warehouse footprint “Amazon Aims to Sublet, End Warehouse Leases as Online Sales Cool” @spencersoper @Bloomberg https://www.bloomberg.c…
“It shouldn't be hard to find tenants. The vacancy rate for industrial space is below 4%, an all-time low, and rents were up 17.6% at the end of 2021, according to a February report from Prologis.” https://www.bloomberg.com/...
Don't seem like Amazon anticipates a big rebound anytime soon $AMZN via @spencersoper “looking to sublet at least 10 million square feet of space and could vacate even more by ending leases with landlords, according to people familiar with the situation.” https://www.bloomberg.co…