Amazon Unloading Property It Bought for New Warehouses

Amazon bought more than 4,100 acres of land during the pandemic that the company was earmarking for new warehouse development—back in 2021, when the e-commerce giant was doubling the size of its logistics network, including an estimated 370M SF of leased industrial space as well as new distribution centers.

Since April of 2022—when Amazon revealed that it had over-extended its warehouse footprint based on an over-estimation of the projected growth rate of e-commerce—the company has been deploying every possible way to trim at least 30M SF (equivalent to $2B in industrial leases) and to revise its blueprint for how much industrial space it will utilize moving forward.

Across the country, the company postponed the opening of newly completed fulfillment centers for up to two years; in rural communities, where Amazon had purchased large tracts of land and local planning officials had approved the development of an Amazon fulfillment center on these sites, the company abruptly canceled the projects before ground was broken.

Amazon initially said it wasn’t giving up on any of the locations where it was shutting down development. However, in H2 2022, the company executed a strategic shift of capital expenditure resources from its e-retail network to an expansion of data-processing infrastructure for its top-priority growth sector—Amazon Web Services, the global cloud computing leader.

Now, the other shoe has dropped, as Amazon has begun selling off some of the land and property it acquired for new warehouse development during its non-stop acquisitions binge in 2021.

Dermody Properties has purchased a four-building office campus in Milpitas from Amazon—and will convert the 29-acre Bay Area site into something that once was part of Amazon’s original plans for the property: a 490K SF warehouse.

The e-commerce giant bought the vacant 395K SF Metro Corporate Center for $123M in October 2021 after the land was entitled by Milpitas for industrial use, according to a report in the San Francisco Business Times. At the time, the company was still scooping up real estate near big cities that could be used for new warehouses.

The transaction with Reno-based Dermody is expected to close by the end of April. Terms of the purchase were not disclosed, but Amazon is believed to be absorbing a loss on the property, according to a report in Bloomberg. Dermody is expecting to break ground on the warehouse project in July. The site is in proximity to Interstate 880, which connects San Jose to Oakland.

“We’re always evaluating our network to make sure it fits our business needs,” said Amazon spokesman Steve Kelly, in a statement.

“As part of this effort, we’ve made the decision to explore selling the Metro Corporate Center site. We’re happy to remain part of the local community and will continue to deliver for customers from our two delivery stations in Milpitas,” Kelly said.

The offloading of properties by Amazon comes as a growing consensus of analysts now project that the e-commerce share of retail—which soared to nearly 60% at one point during the pandemic—will plateau at about 14% to 15% during the next few years.