In a bid to optimize its logistics operations and rein in soaring expenses resulting from its remarkable growth during the pandemic, Amazon has made significant changes to its distribution network in the United States. Over the past 16 months, the e-commerce giant has taken the strategic step of withdrawing from more than 14 million square feet of distribution space across the country. This represents approximately 3 percent of Amazon’s U.S. logistics footprint, as tracked by CoStar.
Most of the distribution center closures occurred during the latter half of 2022. During this period, Amazon focused on shutting down older, less-efficient facilities. More notably, the company decided to put over 30 of its distribution centers, which were built before 2010, back on the market for lease. This strategic move aimed to reduce operational costs associated with these aging facilities, according to CoStar’s report.
The decision to no longer operate these warehouses has had a clear and positive impact on Amazon’s financial performance. Excluding Amazon Web Services (AWS), Amazon’s North American business transitioned from consistent losses in 2022 to profitability during the first three quarters of 2023.
While the pace of distribution center closures slowed during the first half of 2023, it has since picked up again since the beginning of July. Notably, Amazon is offering more of its recent space for sublease opportunities through 2030 and beyond, primarily in larger, newly built distribution properties.
Recent market listings include a 1.1 million square foot facility near Atlanta, a 350,000 square foot property in San Antonio, and a 219,000 square foot center in Fort Worth. These properties, all constructed during the pandemic and leased by Amazon between mid-2020 and mid-2022, highlight a strategic pivot in the company’s real estate footprint.
Despite these changes, Amazon’s total U.S. logistics square footage remains stable in 2023. CoStar reports that the square footage of closed distribution centers is nearly balanced by the volume of new leases signed this year, totaling 6.9 million square feet. This equilibrium suggests a deliberate strategy by Amazon to maintain its vast logistics network’s size while enhancing its efficiency and cost-effectiveness. For example, two of the largest leases signed by Amazon in 2023 were on the outskirts of the San Francisco Bay Area, in Vacaville and Hollister. Additionally, two others occurred along Pennsylvania’s Interstate 81, a crucial corridor for efficiently serving consumers in major metropolitan areas like New York City, Philadelphia, and Washington, D.C.
Overall, Amazon’s total U.S. logistics square footage in operation seems to be holding steady in 2023, as the square footage of distribution center closures is offset by the volume of new leases. CoStar data indicates that 6.7 million square feet of Amazon-occupied logistics space has become available for either direct lease or sublease in 2023. In contrast, Amazon has signed leases for 6.9 million square feet of new space in the United States during the same period.