Amazon Apparently Has a Big, Empty Warehouse Problem
The coronavirus pandemic resulted in online sales surging and with it the need to store more stock, but the world is returning to normal, and Amazon has apparently been left with far too much warehouse capacity.
As Bloomberg reports(Opens in a new window), people familiar with the situation claim Amazon needs to do something with over 10 million square feet of warehouse storage space (roughly the same size as 12 of the company's largest fulfillment centers) it no longer needs. It may actually be triple that amount depending on which source you listen to.
The solution is a mix of attempting to sublet some of the space on short-term contracts (1-2 years), while also negotiating existing lease terminations to be rid of the financial burden. By subleasing a lot of the empty space, Amazon is thought to be hedging its bets in case there's another surge in demand or it simply grows its overall business to start requiring more space again.
To put the size of this downscaling in context, and remind everyone just how big of an operation Amazon runs, at the end of last year Amazon was leasing 370 million square feet of industrial estate in the US. The excess space the company currently holds is expected to amount to $10 billion in additional costs, which makes it clear why Amazon really wants to sign some subleasing agreements or terminate existing lease agreements early.
Amazon declined to comment to Bloomberg regarding the matter, but it's thought real estate company KBC Advisors has been hired to figure out what space should be sublet or terminated. If recent reports of Amazon wanting to turn malls into glorified fulfillment centers turns out to be true, that could cut warehouse requirements yet further.
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