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Amazon Seeks To Offload Up To 10 Million Square Feet Of Warehouse Space

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by Tyler Durden
Sunday, May 22, 2022 - 07:05 PM

It isn't just Walmart and Target that are feeling the effects of the forthcoming economic slowdown. Now, even e-commerce giant Amazon is starting to feel the pain - and take action accordingly.

The retail giant is reportedly "stuck with too much warehouse capacity" now that spending has cooled post-pandemic. The company is looking to end leases with some of its landlords, Bloomberg reported this weekend.

Amazon currently has excess capacity in New York, New Jersey, Southern California and Atlanta, the report says. The excess capacity is said to be more than 10 million square feet, but one source estimated it could even be triple that. 

The company has the option of negotiating lease terminations with some of its landlords, which include Prologis, the report says. 

However, the 10 million square feet that Amazon is looking to offload or sublet is only about 5% of the square footage that the company added during the pandemic. 

An Amazon spokeswoman said: “Subleasing is a very common real estate practice. It allows us to relieve the financial obligations associated with an existing building that no longer meets our needs. Subleasing is something many established corporations do to help manage their real estate portfolio.”

The news comes after Amazon reported a quarter wherein they cautioned investors about profit guidance and admitted to overbuilding during the pandemic. By the end of 2021, Amazon had leased twice as much warehouse space as it had two years prior. 

Amazon has engaged with real estate firm KBC Advisors to help it determine which parcels of land to sublet and which, if any leases, it should terminate. 

Recall, we took full inventory of Amazon’s earnings disaster in late April, noting that the retailer had posted its worst revenue growth numbers in nearly a decade. Profit margins, as we noted, also fell far below expectations.

We also noted earlier today that Amazon was seeking to offload workers, along with Walmart. The two massive U.S. retailers are facing a "staffing problem", according to a new report from Insider.

Walmart admitted this week that the company underwent "weeks of overstaffing" during Q1 2023 as a result of the pandemic. It had hired extra associates toward the end of 2021 to replace those who were out on Covid leave, but those employees came back sooner than expected, the report says.

Meanwhile, Amazon was having trouble hiring workers, before eventually overstocking its coffers. 

Amazon Chief Financial Officer Brian Olsavsky said this week: "As the [Omicron] variant subsided in the second half of the quarter and employees returned from leave, we quickly transitioned from being understaffed to being overstaffed, resulting in lower productivity."

It added another $2 billion in costs for the company, the report says. 

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