Insatiable: Amazon has more than doubled its space during pandemic

TRD analysis shows astounding growth of warehouse and data center footprint

Amazon founder Jeff Bezos (Getty)
Amazon founder Jeff Bezos (Getty)

Amazon knew what it had to do.

E-commerce was booming. People were ordering more items online than ever before — everything from groceries to medication to sweatpants. Warehouses were going to run out of space.

Amazon had to make that someone else’s problem. So it went on a buying and leasing spree.

“We are on track to double our fulfillment network over the two-year period since the pandemic’s early days,” Amazon CFO Brian Olsavsky said last month on an earnings call, adding that the firm expects its 2021 portfolio additions to exceed last year’s.

And it has.

The Seattle-based behemoth has expanded its portfolio of warehouse, distribution, data center and last-mile properties across North America to more than 410 million square feet, according to an analysis by The Real Deal of data from supply chain firm MWPVL International.

That’s about double the amount of office space in Midtown Manhattan, or almost 60 percent of all the warehouse and distribution space in the entire Chicago market.

At the end of 2019 — before the pandemic — the firm had around 192 million square feet of warehouse, data center and distribution space across the U.S. and Canada. Amazon added about 101 million square feet in 2020 and this year has added at least 119 million through September, according to the data and financial reports.

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

Since 2019, the firm has increased its real estate buys, signaling a pivot toward owning more of its own warehouses and distribution hubs. Last year the firm increased its owned square footage of warehouse, fulfillment and data center space across North America by around 50 percent — adding 2.9 million square feet to bring its total to 8.5 million.

Although leased facilities still made up over 97 percent of Amazon’s real estate at the end of last year, the mix is changing.

In the past few months, Amazon has spent heavily to acquire office campuses, development sites and other vacant land across the U.S. for potential redevelopment into warehouses and distribution centers.

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

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

“While we’ve been chasing demand for the last two years, we’re running at about 100 percent all of last year,” Olsavsky said on the earnings call. “We are just now getting caught up on space for inventory.”

Shifting strategy

Owning real estate is a change for the e-commerce giant. In 2019, insiders, competitors and analysts told TRD that Amazon was purely focused on leasing — “it allows them to be in more spaces, more quickly,” one analyst said.

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

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

When Amazon began a growth spurt six or seven years ago, the firm wasn’t really sure what its portfolio was going to look like. A source said there’s 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 said it would build a distribution center on almost 60 acres of undeveloped land it bought in Pleasanton, California.

In October, Amazon bought an office and research complex totaling 395,000 square feet for $123 million. This month, it bought a 30-acre Orange County, California, campus, with around 640,000 square feet of offices, for $165 million. No redevelopment plans have been filed for any of these deals.

Exactly how much distribution hub and warehouse space Amazon has added this year is unclear. Amazon breaks down real estate in terms of leased and owned square footage in its annual reports, released in February, but not in quarterly releases.

Spending through the roof

The expansion has come at a cost: Amazon spent almost $60 billion on capital expenditures last year to purchase and lease property and equipment, as well as sell and buy securities. In 2019, the firm spent around $24 billion on those categories.

The acquisitions were fueled by a major uptick in operations, the firm said. Amazon reeled in $66.1 billion in cash flow from operations last year, most of which came from consumers, sellers and other businesses — a massive jump from $38.5 billion the year prior. On the earnings call, executives called the increasing demand to shop online unprecedented.

Expanding its footprint so rapidly has also forced Amazon to hire hundreds of thousands more workers. In the past 18 months, the firm said, it has added 628,000 employees across the world — including more than 150,000 in the U.S. to support seasonal demand from October through December.

Expansion points

Amazon isn’t slowing down. The firm has announced plans to build 86 facilities next year and five are already scheduled to open in 2023, according to MWPVL International data.

But it’s not just planning for a year out. For its warehouse development in Pleasanton, the firm is hoping to finish by 2024 or 2025, adding it would continue to ramp up operations in the Bay Area.

“We seek to expand our fulfillment network to accommodate a greater selection and in-stock inventory levels and to meet anticipated shipment volumes,” the firm said in an earnings report for the third quarter.

Amazon’s 119 million new square feet this year consists of 432 facilities across 42 states and Washington, D.C., according to the MWPVL International data. 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 out around bigger cities.

A “significant” part of Amazon’s capital investments since the pandemic “has been to support those efforts in middle and last-mile capacity,” Amazon’s director of investor relations, Dave Fildes, said on an earnings call in July. “That work is not done yet.”