Amazon Aims to Sublet, End Warehouse Leases as Online Sales Cool

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(Bloomberg) -- Inc., stuck with excessively overmuch warehouse capableness present that the surge successful pandemic-era buying has faded, is looking to sublet astatine slightest 10 cardinal quadrate feet of abstraction and could vacate adjacent much by ending leases with landlords, according to radical acquainted with the situation.

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The excess capableness includes warehouses successful New York, New Jersey, Southern California and Atlanta, said the people, who requested anonymity due to the fact that they’re not authorized to talk astir the deals. The surfeit of abstraction could acold transcend 10 cardinal quadrate feet, 2 of the radical said, with 1 saying it could beryllium triple that. Another idiosyncratic adjacent to the deliberations said a last estimation connected the quadrate footage to beryllium vacated hasn’t been reached and that the fig remains successful flux.

Amazon could effort to negociate lease terminations with existing landlords, including Prologis Inc., an concern existent property developer that counts the e-commerce elephantine arsenic its biggest tenant, 2 of the radical said.

In a motion that Amazon is being cautious not to chopped excessively profoundly should request rapidly rebound, the 10 cardinal quadrate feet the institution is looking to sublet is astir equivalent to astir 12 of its largest fulfillment centers oregon astir 5% of the quadrate footage added during the pandemic. In different awesome that Amazon is hedging its bets, immoderate of the sublet presumption would past conscionable 1 oregon 2 years.

The institution declined to accidental which abstraction it plans to sublet oregon corroborate the amount.

“Subleasing is simply a precise communal existent property practice,” spokeswoman Alisa Carroll said. “It allows america to relieve the fiscal obligations associated with an existing gathering that nary longer meets our needs. Subleasing is thing galore established corporations bash to assistance negociate their existent property portfolio.”

Prologis declined to comment.

Amazon spooked investors past period aft reporting slowing maturation and a anemic nett outlook that it attributed to overbuilding during the pandemic erstwhile homebound shoppers stormed online. At the extremity of 2021, Amazon leased 370 cardinal quadrate feet of concern abstraction successful its location market, doubly arsenic overmuch arsenic it had 2 years earlier.

In the April net report, the institution said it expected the excess abstraction to lend to $10 cardinal successful other costs successful the archetypal fractional of 2022. The institution didn’t divulge however overmuch over-capacity it had, wherever it was located oregon what it planned to bash with it. Subleasing surplus abstraction is 1 mode for Amazon to trim costs connected abstraction it nary longer needs.

Amazon tasked the existent property steadfast KBC Advisors to measure the warehouse web and find wherever to sublet and wherever to terminate leases, 2 of the radical said. Both options transportation costs. Subletting warehouse abstraction requires Amazon to region each of its instrumentality truthful the caller occupant tin tailor it to their ain needs. Lease terminations typically necessitate the tenant to wage a percent of the rent that would beryllium owed implicit the afloat word of the agreement.

It shouldn’t beryllium hard to find tenants. The vacancy complaint for concern abstraction is beneath 4%, an all-time-low, and rents were up 17.6% astatine the extremity of 2021, according to a February study from Prologis.

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