An End to the Insanity

Amazon has been growing its fulfilment center footprint across the nation at a staggering rate. In 2021, the already enormous footprint expanded by 30%. Amazon’s ambitious building program has been sucking up all of the available supply for warehouse-related construction items like dock doors, dock levelers and if you happen to be in a local market where they are building a new fulfilment center, they are likely sucking up the full capacity of the local concrete suppliers.

We are completing a 650,000SF high-density distribution/fulfilment center building similar to what Amazon is building across the country. Amazon was building in the same market, so we lined up a concrete supplier to put a concrete batch plant on the site of the project. It was a great money and time saver. There was one exception; Amazon needed more concrete-truck drivers for their project so they came to our site during a concrete pour and offered every driver enough money to park his truck and go drive for the Amazon project!

But now Amazon has scaled back their growth plans to only grow their footprint by 20% this year. Many projects in the development pipeline have been shelved for up to a year – an eternity in Amazon time. It is not a sign of slowing demand from consumers, but it was a recognition that the outrageous appetite for new fulfilment center space by Amazon was so high they were competing with themselves for limited construction material resources. They could not finish projects already started, and so they recognized starting more on top of the ones that could not be completed was simply making the problem worse.

Amazon has dialed down their demand to levels they hope the construction materials and construction components supply chains can keep pace with. But even as Amazon has recognized the insanity of trying to build faster than supplies can be delivered, other companies fighting to compete with the dominance of Amazon in the e-fulfillment realm are pressing ahead with their own comparable projects. It will be survival of the fittest as the retail giants duke it out over new methods to satisfy their customers. Time will tell if sanity will return to the warehouse/distribution construction market.

“Joe Hollingsworth participated as one of our first equity investors. In addition, Joe Hollingsworth has served as a board member and leading advisor for strategic planning and direction.” — Scott Kelley, President and CEO, Service Center Metals