Prologis: E-Commerce Market Share Will Climb Higher

Prologis is keeping mum on whether the company is in discussions with Amazon, the largest tenant of its logistics facilities, to reduce part of the e-commerce giant’s huge footprint of leased warehouse space. 

Since a bombshell report from Bloomberg last week that indicated Amazon plans to sublease millions of square feet of its suddenly overextended distribution network—and might terminate some leases—Prologis has been directing all queries about Amazon’s plans back to the e-commerce giant.

“We have a policy of not commenting on behalf of our customers. I would direct you to Amazon for those questions,” Jennifer Nelson, head of corporate communications for Prologis, told GlobeSt.

While deflecting a torrent of incoming questions about Amazon’s plans, Prologis also is taking the opportunity to broadcast a somewhat bullish outlook about e-commerce sales growth, which shrank to 2.4% in Q1, according to the latest retail sales numbers released by the US Department of Commerce.

“E-commerce revenue growth will exceed its pre-pandemic trajectory, and we expect that e-commerce share will climb higher due to faster deployment of same-day and next-day delivery capabilities, improved online sales technologies (e.g. augmented reality, metaverse purchasing) and continued investments in segments like furniture and groceries,” Prologis told Globe St.

The e-commerce share of US retail sales surged from its pre-pandemic level of about 10% to a mid-2020 peak of nearly 17% before leveling off during the past year between 14% and 15%. According to DOC figures released last week, the e-commerce share of US retail sales for Q1 2022 was 14.3%.

Amazon, which doubled the size of its distribution network during the pandemic, revealed during a Q1 earnings call that it absorbed losses of nearly $4B in the first quarter of this year—Amazon’s first quarterly losses since 2015—admitting that it now has a glut of warehouse space because it overestimated the growth rate for e-commerce.

Citing anonymous sources “familiar with the situation,” Bloomberg reported last week that Amazon is considering subleasing at least 10M of its estimated 370M SF of leased warehouse space, and could vacate even more of its gargantuan industrial footprint by ending some leases.

Amazon’s excess storage capacity includes warehouses in New York, New Jersey, Southern California—three of the tightest industrial markets in the US, each filled to capacity—and Atlanta, Bloomberg reported, adding that one of its sources said the overall amount of space Amazon needs to cull may total as much as 30M SF.

The Bloomberg report also indicated that Amazon may “hedge its bets” on its industrial space needs by offering sublease terms of one or two years so the e-commerce titan can re-occupy the industrial space quickly if online sales surge again to pandemic levels.