Amazon's Warehouse Leases Keep Getting Bigger
The company is building in the West to avoid forecasted labor disputes in the East.
Within the first five months of the year, Amazon has signed at least six U.S. leases larger than 1 million square feet, matching the number of leases for spaces that size signed by the company in all of 2023.
It’s just one indication that Amazon’s warehouses have gotten bigger, not to mention all six are in the western half of the country, according to a new analysis from CoStar.
Three are in Phoenix, one in Southern California’s Inland Empire, one at Ontario Ranch, and another in Stockton.
It’s shedding and shying from small- and mid-sized warehouses and East Coast locations.
The average size of Amazon-leased spaces that have come on the market for direct lease or sublease during 2024 is 132,000 square feet, with 90% of these spaces smaller than 250,000 square feet.
CoStar said that driving this westward preference is forecasted labor disputes. For example, the labor contract for the International Longshoremen’s Association, which represents dockworkers of U.S. ports from Maine to Texas is set to expire in September 2024.
“This raises risks of potential strikes and supply chain disruptions at major East and Gulf Coast ports later this year,” according to CoStar analysts Adrian Ponsen and Connor Devereux.
In contrast, the International Longshore and Warehouse Union, representing employees at 29 West Coast ports stretching from California to Washington State, ratified a labor contract in August that will remain in effect through July 2028, said the report.
Larger facilities are preferred because they are better able to utilize automation technology that can more effectively take advantage of more square footage.
Giant distribution facilities with high ceiling heights are best positioned to accommodate cutting-edge robotics and sorting technologies, CoStar said, while also justifying the cost to build these larger facilities.