A Closer Look at Amazon's New Logistics Holdings

There’s been coverage of Amazon’s reversal of a postpandemic pullback in logistics expansion, as the Wall Street Journal recently reported. But an examination of the company’s financial filings raises the question of whether there had been any pullback at all.

Amazon’s warehouse leasing has been growing, as GlobeSt.com previously reported. So far this year, the company has signed at least six warehouse leases of at least 1 million square feet, “matching the number of leases for spaces that size signed by the company in all of 2023.” All were in the western part of the country while the company pulled away from small-to-mid-sized warehouses and East Coast locations.

Many of the current moves, the Wall Street Journal reported, are about Amazon restructuring its distribution network to speed delivery and cut costs. “The changes are aimed at setting up Amazon to better compete with the nation’s largest retailer, Walmart, and low-price online upstarts Shein and Temu,” the Journal wrote. Canadian supply-chain consulting firm MWPVL International told the paper that Amazon had bought, leased, or announced plans for more than 16 million square feet of additional warehouse space.

In addition to the massive warehouses in the West, 100,000-square-foot facilities will help stage last-mile deliveries. The company’s centralized shipping network has become nine independent regions.

“We realized that how we place items when they come in from sellers and vendors is really important, and if we can place those items at facilities that are closest to customers upfront, it allows us to offer both fast speeds and lower our cost to serve,” Udit Madan, vice president for worldwide operations at Amazon, told the Journal.

Amazon’s actions could help revitalize logistical CRE, the Real Deal suggested. “Industrywide, the first quarter ushered in the sixth consecutive three-month period of declining net absorption, at 27.9 million square feet absorbed nationally, according to JLL,” the publication wrote. “Industrial vacancy also rose to 6.1 because of lower tenant demand and a rise in warehouse construction, with higher than average completions.”

As the company’s goal would likely have been planning for increased sales, it’s realistic to assume that Amazon’s vendors would ultimately need more warehousing space.

A GlobeSt.com analysis of Amazon SEC filings shows that while the pace of growth in real estate has slowed over the last few years, it’s never dropped below zero. The year-over-year changes from 2020 through 2023 in all real estate leased or owned by Amazon were: 2020 (50.3%); 2021 (30.0%); 2022 (6.1%), and 2023 (5.3%).

For fulfillment, data center, and other — Amazon doesn’t break the numbers out in finer detail — the year-over-year growth was: 2020 (52.6%), 2021 (31.6%); 2022 (6.9%); and 2023 (6.0%).

The significant slowing might mean less than it seems. Big increases in large numbers are difficult to sustain. Amazon had ramped up its holdings rapidly and there was only so long it could and would need to continue at the previous rate.