Real Estate & Construction  June 6, 2022

Loveland Amazon facility, No. 2 in size in network, not likely on chopping block

LOVELAND — The Amazon fulfillment center under construction in Loveland could end up being the second largest in the Amazon network at 3.87 million square feet. Or it could fall victim to an overexpansion on the part of Inc. (Nasdaq: AMZN) 

Groundwork is well underway in Loveland on the facility, which was confirmed through planning documents in March. The multi-story structure is planned at the north end of Byrd Drive, near the Northern Colorado Regional Airport. Byrd would be extended through the property. 

Work on the five-story Amazon fulfillment center in Loveland has now gone vertical. Ken Amundson/BizWest

Industry analysts generated some storm clouds over the company, however, based upon disclosures in Amazon’s first quarterly financial report. Analysts were quoted in multiple publications as saying that Amazon had overbuilt as the pandemic consumer buying spree began to slow and the war in Ukraine disrupted consumer spending in Europe.

While the Loveland facility may not be on the chopping block — and activity on the site would seem to indicate that it is not — analysts said facilities in New York, New Jersey, California and the Atlanta markets are potentially under consideration for reductions through sales or sublease agreements.

Marc Wulfraat, president of Canada-based MWPVL International, a logistics consulting firm, said the Loveland facility is unlikely to be stopped or reduced in size. When asked about it, he told BizWest, “I highly doubt it. This is a fairly standard five-story Amazon Robotics small sortable facility,and the planning of these buildings occasionally changes but typically the sizing is determined well in advance of permitting and construction. So while the possibility exists that the ground-level square feet may be reduced from 823,871 square feet to 640,000 square feet, I would suggest that this is a low probability event.”

Andy Jassy, CEO of Amazon, was quoted in the company’s first-quarter report as saying that the company is dealing with the impacts of fast growth that has slowed.

“Our consumer business has grown 23% annually over the past two years, with extraordinary growth in 2020 of 39% year-over-year that necessitated doubling the size of our fulfillment network that we’d built over Amazon’s first 25 years — and doing so in just 24 months. Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, but we see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020,” Jassy said.

Analysts have said that the company wants to shed 10 million to 30 million square feet of warehouse space; 10 million would be equivalent to about 5% of the space built in the past two years. They said it took 25 years for the company to grow to 193 million square feet and just two years to double it to 387 million square feet in 1,137 facilities. Of that, 370 million square feet of warehouse space is in North America. The quoted numbers do not include the under-construction Loveland facility.

First to go, according to published reports, would be older facilities that don’t have the most-recent automation equipment. 

The San Francisco Business Times reported that shedding space has already begun, with Dependable Highway Express Inc. subleasing 300,000 square feet of space from Amazon in the East Bay area. 

Amazon’s quarterly report said that cash flow was down 41% to $39.3 billion for the trailing 12 months, compared with $67.2 billion for the preceding 12 months. Net sales, however, were up 7% to $116.4 billion in the quarter. The company’s net loss was $3.8 billion, compared with $8.1 billion in the first quarter of 2021. reported that in addition to real estate decisions, the company is also increasing rates on vendors. Fulfilled by Amazon vendors in the United Kingdom, for example, received letters notifying them that FBA fees would rise 4.3%.

Wulfraat told BizWest in an email that the Loveland facility at 3.87 million square feet would be the second largest in the Amazon network, second only to the nearly complete Ontario, California, facility, which is the largest in the Amazon network at 4.1 million square feet. 

“There are a few buildings in the country that are in the 3.87-million-square-foot size range (including mezzanines) and Loveland is one of them. There’s another being built in Rhode Island that totals 3.865 million square feet; Woodburn, Oregon, will be 3.85 million, etc. There is the possibility that Amazon may delay the startup of some of these new fulfillment centers, which is what has happened at Davenport, Iowa; Shreveport, Louisiana, and Clarksville, Tennessee. They built the facility and will pay the rent bill but will delay the startup by 12 or more months to avoid adding operating expenses in the short term,” Wulfraat said. 

Other internet sources said that the largest warehouse in the world is the Boeing Co. (NYSE: BA) warehouse in Everett, Washington, at 4.3 million square feet.

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