Amazon Halts Opening New Warehouses, Distribution Centers
Amazon binge ends in hangover, halt on warehouse deals amid $4B loss
Reversal follows doubling of industrial space across U.S. during the pandemic
Amazon officially has too much industrial space –– a hangover from spending billions from 2020 and 2022 to double its fulfillment and distribution space across the country.
The company is “no longer chasing physical or staffing capacity,” CEO Andy Jassy said in an earnings release Thursday.
Excess capacity cost the company about $2 billion in “incremental costs” during the first quarter, CFO Brian Olsavsky said on an earnings call.
Amazon reported a $3.8 billion net loss on Thursday — its first quarterly loss since 2015 and compares with a profit of $8.1 billion in the first quarter of 2021. Another key factor in the loss was attributed to the company’s investment in electric truck maker Rivian, as well as inflationary pressures and high gas prices as a result from the war in Ukraine.
Amazon’s stock price is down more than 11 percent since yesterday’s earnings call.
The remarks on real estate mark the first time Amazon has decided to slow down on leasing and buying up industrial space since the start of the pandemic. At the end of 2019, Amazon leased and owned about 192 million square feet of warehouse, distribution and data center space, according to previous financial reports. Two years later, the firm reported 387.1 million square feet — just more than double.
Since the start of the pandemic, the company has also pivoted to owning its own real estate.
At the end of 2021, the company increased its owned real estate portfolio to 16.7 million square feet across North America, according to an annual financial report, up from 5.6 million square feet at the end of 2019.
Amazon’s decision to halt leasing and purchases may soothe the hot industrial market nationally — if Amazon is no longer in the market, other warehousing firms won’t have to compete with its appetite and highly desired credit profile.
The decision to halt opening new warehouses may also explain why the firm recently exited some of its planned properties. In March, Amazon exited a deal in West Covina, California, for a 177,500-square-foot property, where it had already signed a 12-year lease. In California’s East Bay, the company recently subleased a 300,000-square-foot facility.
Amazon isn’t just slowing down across the industrial market. Earlier this year, the firm also decided to shut down its 68 brick-and-mortar stores, including bookstores, exiting the physical retail business.
