Edited by MARK KOLAKOWSKI Released on May 23rd, 2022

Edited by MARK KOLAKOWSKI Released on May 23rd, 2022

Since Amazon’s (AMZN) sales have slowed, the company has decided to reduce the warehouse space it occupies, which will save it around $10 billion in the first half of 2022.

Allegedly, Amazon.com, Inc. (AMZN) wants to eliminate at least 10 million square feet of warehouse space and maybe as much as 30 million. When demand for online goods skyrocketed at the height of the COVID-19 epidemic, Amazon hurried to build capacity, which is now proving to be surplus as demand declines.

According to Amazon’s projections, wasted space would add almost $10 billion to expenses in the first half of 2022.

Edited by MARK KOLAKOWSKI Released on May 23rd, 2022

To put that in perspective, Q1 FY2022 operating income for Amazon was $3.7 billion, and the firm has indicated that it anticipates Q2 FY2022 operating income to be between a loss of $1.0 billion and a profit of $3.0 billio

Vacant Warehouses at Amazon:

New York, New Jersey, Southern California, and Atlanta-area warehouses are allegedly among those with unused space. Meanwhile, 12 of Amazon’s biggest fulfillment facilities could fit inside Amazon’s 10 million square foot footprint.

Which is approximately 5% of the square footage acquired by the firm over the last two years.

Andy Jassy, CEO of Amazon, said, “we’re no longer pursuing physical or personnel capacity.” He estimated that Amazon would have to pay $2 billion in Q1 FY 2022 due to excess capacity.

Ways in Which Amazon Could Reduce Its Footprint:

There is also speculation that Amazon may attempt to negotiate early terminations of its leases on surplus space. Prologis, Inc. (PLD), a real estate investment trust, is Amazon’s largest landlord and may be involved in many discussions.

To add, Amazon may look to sublease some of its unused space. The vacancy rate for industrial areas has hit an all-time low of less than 4%, according to research from Prologis published in February 2022.

Additionally, in 2021, rentals increased by an average of 17.6 percent. Thus, it may not be hard for either Amazon or its landlords to fill the space with paying renters.

Edited by MARK KOLAKOWSKI Released on May 23rd, 2022

There are charges associated with each of these alternatives for Amazon. If Amazon wants to get out of a lease early, it will have to pay a fee proportional to the rent still owed for the remaining period in the contract.

At now, subletting is in progress:

Before it can rent a building, Amazon will have to empty it of its equipment, which will have to be moved elsewhere or sold.

Finally, according to people who know the situation, Amazon may limit the duration of its sublease agreements to as low as one or two years. The corporation may be taking this precaution to protect against the chance of a revival in sales growth that may once again need the space.

A West Coast trucking company called Dependable Highway Express, Inc. recently subleased a 300,000-square-foot industrial building in California’s East Bay from online retail giant Amazon. This sublet is for the facility’s remaining five years of Amazon’s direct lease.

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