Amazon is scaling back their recent breakneck expansion, but Eastern PA’s occupier diversity leaves market growth at little risk of slowing down; other tenants and developers in the market stand to benefit.
During Amazon’s fourth quarter earnings call, CFO Brian Olsavsky shared that the world’s largest e-commerce operation anticipates tempering the pace of its distribution network expansion in the coming year. The remark comes on the heels of two years of unprecedented, breakneck expansion, during which the e-commerce giant doubled their distribution network capacity. In 2020 & 2021, Amazon allocated about 30% of its capital expenditures to warehouse leasing and development, spending over $30 billion last year alone. Olsavsky predicted that the 30% allocation would “moderate” in 2022 to “match the growth of our underlying businesses” – in 2021, U.S. online sales increased 14.2% YOY – with the caveat that “there’s always things that can kick up that growth rate”. The company plans to increase its proportional spend on transportation network and cloud services infrastructure.
Amazon’s dominance in the industrial market is difficult to overstate. According to the global supply chain consulting firm MWPVL, Amazon’s U.S. distribution infrastructure, which includes fulfillment centers, Whole Foods distribution facilities, last-mile delivery stations, and airport hubs, totals 347.6 MSF. An additional 125.6 MSF is in the pipeline. For comparison, Walmart, its closest competitor, occupies less than half that square footage and has just 14 MSF on the way. Last year, Amazon leased or purchased a staggering 88.7 MSF big box fulfillment/distribution space, nearly seven times that of the 2021 runner-up, XPO Logistics.
The new policy prompts due speculation as to how a more “moderate” growth strategy by the largest industrial tenant will affect Eastern PA & other markets. To read more, download the report.
