Amazon more than doubled real estate during the pandemic

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Amazon founder Jeff Bezos (Getty)

Amazon knew what to do.

Electronic commerce was booming. People were ordering more items online than ever before, from groceries to drugs to sweatpants. The warehouses were going to run out of space.

Amazon must have made this problem someone else’s problem. So he embarked on a buying and renting frenzy.

“We are on track to double our distribution network in the two-year period since the early days of the pandemic,” Amazon CFO Brian Olsavsky said last month on a conference call on the results, adding that the company expects additions to its portfolio in 2021 to exceed those of last year.

And that’s the case.

The Seattle-based giant has expanded its portfolio of warehouses, distribution, data centers and last mile properties across North America to more than 410 million square feet, according to an analysis by The real deal data from supply chain company MWPVL International.

That’s roughly double the office space in Midtown Manhattan, or nearly 60% of all warehouse and distribution space in the entire Chicago market.

At the end of 2019 – before the pandemic – the company had approximately 192 million square feet of warehouse, data center and distribution space in the United States and Canada. Amazon added about 101 million square feet in 2020 and this year added at least 119 million square feet through September, according to data and financial reports.

Amazon’s own disclosures and recent purchases also indicate a shift in its commercial real estate strategy.

Since 2019, the company has increased its real estate purchases, signaling a shift towards owning more of its own warehouses and distribution centers. Last year, the company increased the area of ​​its warehouses, fulfillment centers and data centers in North America by approximately 50%, adding 2.9 million square feet to bring its total. to 8.5 million.

Although leased facilities still accounted for over 97% of Amazon’s real estate at the end of last year, the makeup is changing.

Over the past few months, Amazon has spent a lot to acquire office campuses, development sites and other vacant land across the United States for possible redevelopment into warehouses and distribution centers.

The company did not respond to questions and a request for comment.

Amazon’s frantic push to add warehouse and distribution capabilities has been spurred by the pandemic’s effect on e-commerce.

“While we’ve been chasing demand over the past two years, we’re running about 100 percent all last year,” Olsavsky said during the call for the results. “We just made up for the inventory space. “

Change of strategy

Owning real estate is a change for the e-commerce giant. In 2019, insiders, competitors and analysts said TRD that Amazon was purely rental-oriented – “it allows them to be in more spaces, faster,” one analyst said.

But, after the pandemic struck and industrial rents started to soar, Amazon may have looked to change strategy. Sources familiar with Amazon’s balance sheet and operations say it might be more comfortable to own real estate now.

When companies become more confident about what their long-term asset portfolio will be, they are more inclined to buy real estate, one of those observers said.

When Amazon started a growth spurt six or seven years ago, the company was unsure of how its portfolio would look. A source said there was more certainty now.

In August, Amazon paid $ 85 million to buy a 133-acre site in Sunrise, Florida, where it plans to build a fulfillment center. A month later, Amazon announced it would build a fulfillment center on nearly 60 acres of undeveloped land it purchased in Pleasanton, California.

In October, Amazon bought a 395,000 square foot office and research complex for $ 123 million. This month, he bought a 30-acre campus in Orange County, Calif., With approximately 640,000 square feet of office space, for $ 165 million. No redevelopment plan has been filed for any of these transactions.

The exact amount of distribution hub and warehouse space that Amazon added this year is unclear. Amazon breaks down real estate by rented and owned square footage in its annual reports, released in February, but not in the quarterly releases.

Spending through the roof

The expansion came at a cost: Amazon spent nearly $ 60 billion in capital expenditures last year to buy and rent goods and equipment, as well as sell and buy securities. In 2019, the company spent around $ 24 billion in these categories.

The acquisitions were fueled by a significant increase in operations, the company said. Amazon generated $ 66.1 billion in cash flow from its operations last year, most of which came from consumers, sellers and other businesses – a huge jump from the $ 38.5 billion in the previous year. During the call for results, executives called the growing demand for unprecedented online shopping.

The rapid expansion of its footprint has also forced Amazon to hire hundreds of thousands of additional workers. In the past 18 months, the company said, it has added 628,000 employees worldwide, including more than 150,000 in the United States to meet seasonal demand from October through December.

Extension points

Amazon is not slowing down. The company has announced plans to build 86 facilities next year and five are expected to open already in 2023, according to data from MWPVL International.

But it’s not just about planning for a year. For the development of its warehouse in Pleasanton, the company hopes to complete by 2024 or 2025, adding that it will continue to scale up operations in the Bay Area.

“We are looking to expand our distribution network to accommodate greater selection and in-stock inventory levels and to meet expected shipment volumes,” the company said in a third quarter earnings report.

Amazon’s 119 million new square feet this year consists of 432 facilities across 42 states and Washington, DC, according to data from MWPVL International. The company added no space in South Carolina, Hawaii, Maine, Montana, Rhode Island, Vermont, West Virginia, and Wyoming.

It focused on a handful of states for its planned distribution centers. California will get the most this year, 51, while Texas will get 45, Florida 38 and New York 27.

The average size of a new Amazon facility was around 316,000 square feet, with the most popular type of center being a delivery station – a last mile center that holds and distributes small packages. Usually these are built around large cities.

A “significant” part of Amazon’s capital investment since the pandemic “has been to support these efforts in middle and last mile capacity,” Amazon director of investor relations Dave Fildes said during a call for results in July. “This work is not yet finished.”


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