Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

Category: Distribution and Materials Handling

Supply Chain News: Will Amazon Ditching of Fulfillment Space Cool Red Hot Warehouse Market?

 

Demand still Exceeds Supply for Now, amid Some Signs eCommerce Volumes are Slowing

 
June 2, 2022

 

SCDigest Editorial Staff

After adding fulfillment center and other logistics space at a pace almost hard to be believe in the past decade and especially the last two years, surprising news from an article on Bloomberg.com last week: Amazon is moving ahead with either abandoning or even subletting as much as 30 million square feet of logistics space, saying it simply has a lot more than it needs in some markets.

Supply Chain Digest Says...

Equus Capital Partners, a private equity firm, says it has already rented out more than half of the 11 million of industrial space that it has in the pipeline in high-growth states.


What do you say?

Click here to send us your comments
Click here to see reader feedback
 

The excess capacity reportedly includes fulfillment centers in New York, New Jersey, Southern California, and Atlanta. Still, 30 million square feet of space represents a small fraction the estimated 374 million square feet in Amazon’s US network at the end of 2021, according to consulting firm MWPVL International.

Bloomberg also reports that West Coast carrier Dependable Highway Express recently sub-leased warehouse space from Amazon in the East Bay region of California measuring 300,000 square feet.

After its massive multi-year FC land grab, Amazon CEO Andy Jassy now says that the company is "no longer chasing physical or staffing capacity."

Part of the issue is a massive slowdown in its business, with on-line sales modestly declining in the last two quarters after years of rapid growth.

The key question now: is Amazon’s move to jettison space a sign the red hot market for warehouse facilities – sending rates soaring and vacancies hard to find – going to at last create a better balance of warehouse supply and demand, after years of developers and landlords having all the clout?

Amazon’s move “is likely to disappoint some developers who had been hoping to lease projects under way to Amazon,” the Wall Street Journal reported this week.

It will also be adding new supply of warehouse space in the markets where it decides to sublet parts of its properties.

(See More Below)

CATEGORY SPONSOR: SOFTEON

 

 

 

But in the near term supply will still stay low versus demand, Evan Serton, a senior portfolio specialist at Cohen & Steers, told the Wall Steet Journal, saying that “Other supply chain companies [shippers] are still ramping up, which is likely to offset the negative effect from Amazon.”

Meanwhile, Equus Capital Partners, a private equity firm, says it has already rented out more than half of the 11 million of industrial space that it has in the pipeline in high-growth states, including Arizona, Florida and Virginia, according to Kyle Turner, director of investments.

“You start doing the site work, pouring the foundation and the tenant comes along and you lease it,” Turner told the Journal.

And while real estate firm CBRE says warehouse spaced leased this year will drop to about 850 million square feet from last year’s record 1 billion, that is in part because there is not enough supply to meet demand.

Still, much of the real or expected demand is coming from ecommerce fulfillment – and there are signs that is slowing. As noted above, on-line sales at Amazon fell 3% in Q1 after a 1% drop in Q4 2021.

And the US Census Bureau data on retail sales released in May estimated ecommerce sales were up just 6.6% in Q1 versus the same period in 2021 – down from 10.3% year over year in Q4.

What are your thoughts on the US warehouse space market? Let us know your thoughts at the Feedback button below (email) or in the Feedback section.



 
 
   

Features

Resources

Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator

Newsletter

Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
submit
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
 
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2021 - All rights reserved
.