Monday, August 7, 2023

Amazon Resumes Leasing Spree Along Pennsylvania’s I-81 Corridor

By Adrian Ponsen and Brenda Nguyen CoStar Analytics

Since Amazon’s first quarter 2022 earnings call when the company first disclosed it planned to address excess capacity in its distribution network, the e-commerce giant has slowed openings of new fulfillment centers and put more than 7 million square feet of industrial space up for sublease across the U.S.

According to its last annual report, during 2022, Amazon’s leased North American fulfillment and data centers grew at the slowest pace in at least seven years.

Pennsylvania’s I-81 corridor stands out as the region where Amazon is continuing to expand its distribution center network, despite taking a more defensive posture towards its North American real estate footprint overall.

Over the past 12 months, Amazon has signed three large industrial leases along Interstate 81 in Pennsylvania totaling 2.9 million square feet. The two largest deals, Amazon’s 1.3 million-square-foot lease at the recently completed Rausch Creek Logistics Center in Tremont, and its 1.1 million-square-foot lease at United Business Park in Shippensburg, have already made 2023 theI-81 Corridor’s busiest year on record for total square feet leased by Amazon.

The e-commerce giant is not just adding new I-81 distribution centers to its network, but it also appears to be fully utilizing the I-81 properties it already occupies.

Over the past 14 months, the company has been implementing cost-cutting measures, leading to the listing of more than 70 Amazon-leased industrial spaces across the U.S., totaling 11 million square feet. Most of these spaces are in older and smaller, distribution properties that are less cost effective for Amazon to operate and are being listed for sublease. But a significant share of the properties being put up for sublease are where the company has leases approaching expiration and has not yet renewed.

Major U.S industrial markets such as Atlanta, Chicago, Dallas and Philadelphia have each had at least four Amazon-leased spaces be put on the market as available since mid-2022. In stark contrast, while Amazon already occupies at least 8 million square feet across 13 different Pennsylvania industrial properties within 30 miles of I-81, none of these spaces have come available for lease.

Amazon’s persistent growth along I-81 likely ties back to the corridor’s ideal location for serving the I-95 population corridor stretching from Washington D.C. through Baltimore, Philadelphia and New York, arguably the largest cluster of purchasing power in the Western Hemisphere.

Key Pennsylvania markets along I-81 where Amazon has been leasing in recent years, such as Pottsville, Scranton and Harrisburg, each have between 30 and 40 million U.S. residents within a four-hour truck drive on a typical weekday morning. This is almost double the number of residents within a four-hour truck drive of other major population centers such as Los Angeles, Atlanta and Dallas.

For example, from its regional distribution center in Tremont, Pennsylvania, where Amazon signed its largest U.S. lease so far in 2023, delivery trucks can reach last-mile delivery stations near either New York, Philadelphia, Baltimore, or Washington within just a four-hour drive.

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