A Bloomberg article by Spencer Soper and Natalie Wong explains the growth of Amazon’s real estate holdings. “Starting about three years ago, the Seattle-based colossus quietly began searching for property in key US markets such as Southern California, Texas, Illinois, Florida and the Bay Area. Between 2020 and 2022, Amazon tripled the amount of built industrial space it owns in North America, according to company filings.”
As the authors note, “It’s a potentially risky strategy that exposes Amazon to the vagaries of the industrial real estate market. The company also overbuilt during the pandemic and is saddled with too much warehouse space now that the surge in online shopping has decelerated.” Yet “Executives remain committed to securing land in the right locations to fulfill founder Jeff Bezos’ vision of making an online purchase as instantly gratifying as a trip to the store.”
However, “Buying land is risky. Developing it is even more so because Amazon itself must negotiate the local bureaucracy and politics. But executives feel they have no choice, according to people familiar with the strategy, because the new generation of fulfillment centers are several orders of magnitude more complicated than the 40-foot boxes currently dotted around the country.”
According to the article, the company is already hedging its bets, slowing down their plans as online sales slow and a recession looms on the horizon. “The question now is how Amazon will adapt a boom-era strategy to current economic conditions.”
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