Why Amazon's warehouse pullback is good news for contractors | Dump Trucks Charlotte NC

A slowdown by Amazon is a boon for others in the warehouse sector, especially for procurement of materials, according to industry sources.

Last month, Amazon announced plans to shed at least 10 million square feet of warehouse space after reporting slow growth and a weak profit outlook that it attributed to overbuilding, according to Bloomberg.

As the e-commerce giant hits the brakes on expansion, that should translate to shorter lead times for currently scarce materials such as roofing components, roofing insulation, bar joists, precast and steel, said Tom Belanich, industrial director at Messer Construction, a Cincinnati-based general contractor. Other materials that might become more available include warehouse dock equipment, HVAC columbus oh dump trucks and electrical equipment, said Belanich.

“When Amazon was ramping up, extremely active and building new facilities, the lead times for those materials began to stretch further and further out," said Belanich. "Then, obviously, the demand for those went up significantly, which caused the price to go up.” 

Now, Amazon hitting the pause button on its warehouses should have the opposite effect. 

“When you reduce the demand for those things, certainly it’s going to improve the lead time and we should start to see some easing of the cost implications for those materials also,” Belanich said. 

'Fighting over Amazon's bucket'

Charles Byerly, CEO Of Westport Properties, an Irvine, California-based owner and operator of self storage, multifamily and industrial properties across the U.S., said the slowdown by Amazon will undoubtedly free materials up for other new development.

“When you look at roof trusses as an example, those have been six to 12 to 18 months [out], depending on exactly what they are,” said Byerly, and noted that Amazon's slowdown "is certainly going to put priorities in different buckets other than just Amazon’s, because everybody was fighting for that bucket.”

Amazon went on a massive spending splurge during the pandemic in order to capitalize on booming demand for e-commerce and home delivery. In some cases, Amazon bought everything in production for months, putting significant pressure on an already strained supply chain. That was further exacerbated when columbus oh dump truck company turned to hoarding materials earlier this year. 

Amazon was the largest builder of warehouses over the last three years, totaling $10 billion, or about 6% of the total construction activity, according to Dodge Data & Analytics. 

But including projects built specifically for Amazon by developers like NorthPoint Development and others, Amazon’s market share jumps to around 13%, said Dodge Chief Economist Richard Branch during a construction outlook webinar. 

Amazon is “such a large player in this market that if they start pulling back on construction activity, it will pull the market down with them,” Branch said, referring to overall warehouse starts. While that means the warehouse sector could slow as well, a pullback is welcome in other ways.

That's because an Amazon slowdown has positives beyond just material availability, said Bob Smietana, vice chairman and CEO of HSA Commercial Real Estate, a Chicago-based national full-service commercial real estate firm. The land market should ease as well. 

“With one of the big players in space allocation for distribution real estate in the U.S. slowing down, for some of us that’s actually good news,” said Smietana. “It’s going to eliminate some additional competition.”

A booming sector

Even if warehouse starts slow as a result, there's still plenty of columbus oh dump truck company to go around. 

For example, Brian Sudduth, president of Miller Construction Co., a Fort Lauderdale, Florida-based general contractor, said there is still enough demand in Florida and that the projected Amazon pullback hasn't affected its outlook. In fact, Miller’s warehouse backlog in 2023 is greater than what it had coming into this year.

“I don’t see [a slowdown] here in central South Florida,” said Sudduth. “When you add in all the other industrial developments that have happened throughout the state, it hasn’t resulted in a slowdown.”