Amazon’s building its biggest warehouse yet, even though it already has more industrial space than it knows what to do with

Looks like a mega-mall... actually Amazon’s biggest warehouse ever. The five-story, 4M-square-foot facility has been under construction in Southern California since last summer — eons ago in the world of ecommerce. The distribution center is about to come online at a time when Amazon finds itself with too much warehouse space.

• Glut: After doubling its portfolio of warehouse space to 387M square feet since 2020, the Zon recently said it would sublease at least 10M square feet after posting its slowest growth in two decades.

(Ware)house hunters… At the height of the pandemic, retailers like Amazon, Costco, and Walmart snapped up record amounts of storage and fulfillment space to keep up with demand. Their belief was that Covid would accelerate the transition to ecommerce and they’d have the square footage to keep the boom going. But two years later, online shopping has cooled and consumer retail habits are roughly back to where they were pre-pandemic. That’s causing online-only retailers like Amazon to offload extra space to cut costs — and it’s leading to a real-estate ripple effect.

• For retailers: The Zon shouldn’t have trouble finding tenants for its subleases, because many smaller competitors still don't have enough space to pick up inventory from container ports.
• For industrial-property owners: The red-hot growth in the warehouse space could slow now that Amazon is dumping millions of square feet onto the market.