According to people familiar with the matter, as the online shopping tide driven by the COVID-19 subsides, amazon.us has been suffering from the problem of excessive warehouse capacity. Therefore, the company is considering subletting at least 10million square feet of space, and may even terminate the lease with the landlord. The person familiar with the matter said that Amazon's current excess storage capacity includes locations in New York, New Jersey, Southern California and Atlanta, and the excess space may be far more than 10 million square feet, or even three times this figure, but the final evaluation figure has not been determined.
People familiar with the matter also said that Amazon may try to negotiate with existing landlords to terminate the lease, including industrial real estate developer ProLogis Inc., which regards the e-commerce giant as its largest tenant.
It is understood that in order to avoid reducing too much storage space at once, Amazon plans to sublease 10 million square feet, which is equivalent to about 5% of the storage area increased during the Amazon epidemic, and some sublet leases have a term of only one to two years, in preparation for the rapid recovery of Online shopping demand.
In this regard, Amazon declined to disclose which sites it plans to sublet and to confirm the sublease amount. ProLogis declined to comment.
Amazon spokesman Alisa Carroll said: "subletting is a very common real estate behavior, which allows us to reduce the financial responsibility of existing buildings that have been inconsistent with the demand. Subletting is the behavior used by many well-known enterprises to help manage the real estate portfolio."
Zhitong finance learned that Amazon reported last month that its growth slowed and its profit outlook was weak, which was attributed to excessive construction during the epidemic. At the end of 2021, Amazon leased 370 million square feet of industrial space in its home market, twice as much as two years ago. However, in its April earnings report, the company said it expected that these excess space would bring an additional cost of $10 billion in the first half of 2022.
At present, Amazon did not disclose the extent and location of its overcapacity and how it plans to deal with it. According to the above informed sources, Amazon commissioned real estate company KBC advisors to evaluate the warehouse network and decide where to sublet and where to terminate the lease. However, it is certain that these two methods will bring costs to Amazon. Subletting the warehouse space requires Amazon to remove all equipment so that new tenants can customize the warehouse according to their own needs. However, the termination of the lease usually requires tenants to pay a certain proportion of the rent due within the whole term of the agreement.
However, it should not be difficult for ProLogis to find tenants. According to a report of the company in February, the vacancy rate of industrial space was lower than 4%, a record low, and the rent increased by 17.6% at the end of 2021.