Amazon Aims To Sublet, End Warehouse Leases as Online Sales Cool

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, according to people familiar with the situation. From a report: The excess capacity includes warehouses in New York, New Jersey, Southern California and Atlanta, said the people, who requested anonymity because they're not authorized to speak about the deals. The surfeit of space could far exceed 10 million square feet, two of the people said, with one saying it could be triple that. Another person close to the deliberations said a final estimate on the square footage to be vacated hasn't been reached and that the figure remains in flux.

Amazon could try to negotiate lease terminations with existing landlords, including Prologis, an industrial real estate developer that counts the e-commerce giant as its biggest tenant, two of the people said. In a sign that Amazon is being careful not to cut too deeply should demand quickly rebound, the 10 million square feet the company is looking to sublet is roughly equivalent to about 12 of its largest fulfillment centers or about 5% of the square footage added during the pandemic. In another signal that Amazon is hedging its bets, some of the sublet terms would last just one or two years.

I HAVE Spoken

[koko]

Saw that on some TV show. Now that is COOL. I've no idea about this Amazon failure. Unions?

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[StormReaver]

Saw that on some TV show.

The Mandalorian.

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[denny_deluxe]

And Cobra Commander.

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[Anonymous Coward]

All life as we know it ends in death. Stop worrying about dying and embrace the present to enjoy what life you have left - at least until the money runs out.

I wonder if they could convert the space for AWS

[leonbev]

I mean, AWS seems to have a need for more AWS Local Zones in certain locations. Why not carve off some of the warehouse space and turn it into a data center?

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[stabiesoft]

Machines require cooling and is usually designed into the bldg plan, people have to live with what amazon provides.

Re:I wonder if they could convert the space for AW

[Zekolas]

I would assume data centers are built very very differently than warehouses and to turn a warehouse into a data center might cost as much just to build a brand new datacenter.

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[ArsenneLupin]

I would assume data centers are built very very differently than warehouses and to turn a warehouse into a data center might cost as much just to build a brand new datacenter.

Has been done here in Luxembourg. Root.lu started out in a warehouse. Nowadays of course they do have a proper datacenter.

Obviously, during their warehouse days, the servers were not as tightly packed, and many not even rack mountable.

Re:I wonder if they could convert the space for AW

[kwalker]

I would assume data centers are built very very differently than warehouses and to turn a warehouse into a data center might cost as much just to build a brand new datacenter.

Having worked in both data centers and warehouses, I can confidently tell you that you would be surprised. The number of converted warehouses I've seen that are data centers was truly surprising my first decade in the business. Seriously. A raised floor, a drop ceiling, and a pile of CRAC units is about all you need. You don't even need a power substation unless you're trying to build big.

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[xlsior]

I mean, AWS seems to have a need for more AWS Local Zones in certain locations. Why not carve off some of the warehouse space and turn it into a data center?

That might be possible for some locations, but generally the requirements for a datacenter are VERY different from the requirements to run a distribution warehouse:

1) You'd need to availability of massive amounts of power to run a datacenter, which simply isn't available in many areas. Amazon uses literally gigawatts of power for AWS, and it takes FOREVER to build out local infrastructure that can provide that.
2) When you use that much power, there is a huge incentive to put your datacenter in places wit

I don't think this is necessarily Covid cooling...

[Voyager529]

The pandemic may have boosted sales for a bit due to the stimulus checks and vacation money being redirected, but I can't imagine Jeff seeing that sort of a spike and saying "buy 10 million square feet of warehouse space with lengthy leases immediately, nevermind that trucking and shipping are a mess and that warehouse space is unlikely to actually be filled by time things get back to normal!"

I think there are three major components when it comes to Amazon's dropoff in sales.

First, gas/electricity/rent are getting more expensive, all at once. People will still buy the essentials of course, but the first thing that goes away when the squeeze hits are optional / impulse purchases. Something tells me that if trend lines were made for food and cleaning products vs. designer clothes and video games, those lines would look just a bit different.

Second, the supply chain continues to be messy. I have lost track of what we're blaming this week...is it still Putin? or China's new round of lockdowns? Or is it Trump's fault? Whatever the reason, the supply chain continues to be a mess, so Amazon has less inventory because there's fewer items arriving in order to occupy warehouse space.

Finally, Amazon's search continues to worsen. I looked for one of the iFixIt kits yesterday to replace the one I left at a clients' office somewhere, and searching for "iFixIt Repair Kit" gave me two pages of no-name knockoffs before showing me what I'd actually searched for. I have no problem with Amazon showing me options; in fact I did end up buying one of the knockoffs in the end...but the fact that I searched for "iFixIt" and the entire first page of results was the set of items that didn't even have something like "compare to iFixIt" in the title was frustrating. By contrast, I searched "iFixIt" in Microcenter's website, and the first three items they showed me were exactly what I was looking for. I'm likely to return my knockoff unit and buy the real thing at a retail store instead.
That sort of thing happens often enough that buying on Amazon has lost a measurable amount of its convenience factor. Meanwhile, I've gotten "grey market" Cisco switches when I was under the impression that I was ordering official units (I paid MSRP for them), while genuine Apple Earpods and Airpods are basically impossible to reliably source vs. the counterfeits.
This sort of thing isn't going to cause me to stop buying things on Amazon, but it does make retail shopping more worth my while.

Put it all together, and yeah, this makes perfect sense.

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[OverlordQ]

So much this.

When searching for an item and the first pages are just the random no-name gibberish 'brands' that are clearly the exact same white-label chineseium.

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[snowshovelboy]

And the pandemic forced brick and mortar stores to innovate. If I'm already commuting to the office again, ordering online for pick up is more convenient than anything amazon can offer. Its even more convenient than their stores of the future where it spies on you while you shop so you can skip the checkout line.

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[Junta]

I hate the prospect of searching for things on Amazon now. The disreputable vendors have become just so adept at gaming Amazon search and review system and just flood the results with dubious crap. Cheap fly-by-night vendors with little accountability and farmed reviews drown out legitimate reviews of the longer standing trusted products with legitimate customer feedback.

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[pjp6259]

I'm not sure why we see such different results, but when I search amazon for "iFixIt Repair Kit", the first 2 results I get are iFixit brand repair kits. If I put it in quotes, the first 7 results are iFixit Brand kits.

JFK8

[renzema]

Shall we place bets that JFK8 is high on the chopping block?

And the commericial real estate crisis

[wakeboarder]

is going to hit in 3... 2... 1...

Haha.

[denny_deluxe]

They're still building new Amazon warehouses here in Omaha. Right next to the other ones!

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[Xest]

Probably different projects though. Not sure what projects the US has but in the UK you have a number of types of warehouse:

- Fulfilment centres: Where all your normal run of the mill Amazon orders are picked and packed.

- Distribution centres: Centralised locations where orders are routed through; i.e. you might have 20 fulfilment centres sending packages to a distribution centre which then amalgamates them onto individual trucks (or planes) destined to further away locations. So imagine 20 trucks bring pac

Union Busting?

[TheRealDilbert]

Wouldn't be surprised if the Amazon sites on the chopping block are ALSO the same sites where workers are looking to get unionized.

Sales on Amazon are down because...

[TheRealDilbert]

Blame it on whatever you want, but the main reason sales on Amazon are down is due to prices across the site rising significantly. I get there is inflation, but many items I bought in the recent past are now 50% higher. This will dampen sales no matter what the reasons are for the prices rising.

Fair warning

[Slashythenkilly]

Dont ever go into business with Amazon because you will lose. They have iron clad contracts and an army of lawyers that make them responsible for nothing and you liable to pay for everything. Just check out how they treat their "delivery service partners" - independent companies that are micro-managed at every level which is completely illegal yet Amazon pushes until they give in or get out.

Surprised by this.

[waspleg]

Considering that they recently announced [cnbc.com] they want to be a 3rd party logistics company competing with UPS and FedEx.

I would think the extra space might be used for Other People's Packages (I know you 90s kids are down with OPP).

Units

[Waffle Iron]

For all of those who see "10 million square feet" and come here to complain about US units, I'll clarify that the area being discussed is about equal to 918 rood, or 37000 square perch.

Convert them to hydroponics.

[bjwest]

Those warehouses are extremely large open spaces with high ceilings. They would be perfect for multi-tier hydroponic farming, which we're going to need plenty of if we expect to prevent most of the world's population from starving to death in the future.

the best software

[albertnakali]

Working with Amazon is not a good idea nowadays because it doesn't seem to care about customers at all, and in general, it used to be way better in the past. Even when I was choosing the best marketplace software [api2cart.com] and stumbled upon Amazon one, I knew that choosing it wouldn't be good for me, and I decided to turn to another api.

Well

[FerasFersativ]

Well, it's not something I really care about, and I think as long as the quality of products and the delivery date remain the same, it's okay. I was just thinking about buying some kitchen appliances on Amazon because I'm planning a renovation, I've already ordered Kitchen Cabinets Philadelphia [kitchensearch.com] and so on, and I hope that it won't take me forever to finish it because I know how long the delivery of products from Amazon can be.

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[FerasFersativ]

I just hope it won't affect the delivery date much because I'm planning to order a lot from Amazon for my kitchen. I'm planning a renovation, and I've already thrown away half of the stuff and ordered Kitchen Cabinets WILLINGBORO, NJ [kitchensearch.com], so I don't think it'll be great if everything that's in my kitchen is cabinets, even for a week or so.