Amazon was opening a warehouse every 24 hours…but not now

Amazon was building warehouses at a rapid pace during COVID-19:

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When homebound shoppers stampeded online during the pandemic, Amazon responded by doubling the size of its logistics network over a two-year period, a rapid buildout that exceeded that of rivals and partners like Walmart Inc., United Parcel Service Inc. and FedEx Corp. For a time, Amazon was opening a new warehouse somewhere in the U.S. roughly every 24 hours. Jassy told Bloomberg in June that the company had decided in early 2021 to build toward the high end of its forecasts for shopper demand, erring on the side of having too much warehouse space rather than too little. 

But, now the opposite is happening:

MWPVL International Inc., which tracks Amazon’s real-estate footprint, estimates the company has either shuttered or killed plans to open 42 facilities totaling almost 25 million square feet of usable space. The company has delayed opening an additional 21 locations, totaling nearly 28 million square feet, according to MWPVL. The e-commerce giant also has canceled a handful of European projects, mostly in Spain, the firm said.

The scale of this is worth marking: a new warehouse every day.

Companies act in such ways given economic conditions. Yet, these are not just business decisions; they affect communities. As Amazon rapidly expanded, many communities sought out such a facility and/or offered tax breaks and incentives. This happened in the Chicago region. If Amazon contracts, this affects local decisions and revenues.

As conditions change, will communities operate differently toward Amazon or will they reassess their approach to attracting businesses, jobs, and revenues? Many communities would still probably prefer to have an Amazon facility in the long run but they may be harder to entice or the competition might be stiffer. Or, if Amazon facilities come and go, they might be inclined to look toward other firms or industries.

More warehouses coming to the Chicago region

Chicagoland will be adding a lot more warehouse space in the near term:

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Molto plans to break ground this month on a 1.1-million-square-foot distribution facility, the first phase of its 110-acre Minooka Ridge Business Park in Minooka, a village near I-80 and southwest of Joliet. The company is also developing Weber55 Logistics Park, a two-building complex on 60 acres at the northeast corner of Weber and Taylor roads in Romeoville, another Joliet suburb. That site will include distribution facilities of 627,840 square feet and 270,000 square feet…

Other developers are just as active. At the end of March, 44 buildings of more than 200,000 square feet, a record-breaking 23.7 million square feet in total, were underway across the Chicago metropolitan area, according to Colliers International.

And tenants are plentiful. In the second quarter alone, Amazon leased a 1-million-square-foot warehouse in Joliet, and another in Kenosha, while other companies, including NFI, SC Johnson and RJW Logistics, signed deals for more than 500,000 square feet.

The amount of big-box industrial space that is vacant in the Chicago area tanked during the first quarter of 2022 because so much space was leased or occupied. The industrial vacancy rate fell ”by more than a full percentage point to 2.61%, a record low by a wide margin,” Colliers reported.

As shopping malls and downtown brick and mortar sales struggle, warehouse space is booming. This helps service online shopping as well as big box stores.

Elsewhere in the article, the increase in warehouse space is tied to jobs and possibly cheaper prices for consumers. But, adding such space may not always work out so well in comparison to how else land could be used. And the locations cited in the article suggest Will County is a warehouse center as are other locations more on the edges of the Chicago region.

Many goods come via truck, few want to encounter those trucks on a suburban road

Trucking is essential to the American economy. However, it is not desirable to encounter many trucks on local roads. Here is how one Chicago area county wants to address the issue:

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“The key is really getting trucks onto the interstate as safely and efficiently as possible,” said Patricia Mangano, senior transportation planner with the Chicago Metropolitan Agency for Planning.

As the county grows and the region continues to be an important national transportation hub, the study recommends strategies to minimize the negative impact of freight traffic to residents and the environment…

The report says that high volumes of truck traffic have led to safety and congestion concerns, especially in sensitive areas such as historic districts, neighborhoods or environmentally protected areas. The study notes western Will County’s natural and cultural assets, such as Midewin National Tallgrass Prairie, Abraham Lincoln National Cemetery and the Kankakee River, could be negatively affected by new development and traffic…

“We are the proverbial crossroads of America,” he said, noting residents just want to ensure they can get from work to home to their children’s activities without being caught in traffic.

In recent decades, Will County has become home to an increasing number of warehouses and intermodal facilities. This could be viewed as a positive for economic activity and growth which then leads to more tax revenues, jobs, and prestige.

Yet, certain industries do not necessarily mesh well with the suburban single-family home ideal. Trucks are related to a number of concerns residents have about all sorts of land uses: noise, traffic, lights, threats to the residential ideal they hope for.

I see the point of routing truck traffic along particular roads. This also has the effect of altering those roads. I can think of several major thoroughfares near here that are full of truck traffic during the day. Driving on these roads can be quite different than driving on other main roads. And because the way many suburban communities are laid out, there are often not good alternative routes since traffic in general is funneled from smaller residential streets to larger volume roads.

An impractical suggestion that might please suburban residents: have truck only roads that lead from industrial and commercial properties straight to highways. In many locations, this might work as warehouses and distribution centers are clustered together as are big box stores and shopping malls. On suburban roads without big trucks, suburbanites might occasionally find the opportunity to drive like people do in car commercials: on the open road.

The spatial impacts of Amazon

A review of a new book about Amazon highlights the geographic impact of the influential company:

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In some of MacGillis’s stories, the connection to Amazon is so tenuous as to be almost indiscernible; the characters’ problems seem to arise more from larger forces, such as globalization, gentrification, and the opioid crisis, than from any one corporation’s influence. A young man from small-town Ohio—alienated by his experience in D.C., where he starts college—returns home and enters Democratic politics. After scoring a local success, he runs for Congress, determined that the party not write off his opioid-ravaged, Trump-supporting region, but he fails to drum up more than a couple of union endorsements. A gospel singer who became a cultural force in Seattle during the ’80s watches as her neighbors are pushed out of the city’s historically Black Central District one by one.

Local energies may have been sapped for many reasons, yet in the coastal cities that MacGillis visits, Amazon’s disproportionate ability to further enrich and empower already thriving places and workers is glaring. Familiar though they are, evocations of the six-figure salaries and amenities available to young Amazon programmers—a café catering to their dogs, meeting space in a giant replica of a bird’s nest—acquire new salience set against Torrez’s experience. And the sense of entitlement on display in the company’s search for a second headquarters site is breathtaking. Local officials across hard-knock America prostrate themselves for a chance to host it. In the end, Amazon chooses the suburbs of the nation’s capital—already one of the wealthiest areas in the country—and walks away having amassed a great deal of useful regional data provided by eager bidders who probably never stood a chance.

In the less glamorous pockets of the country—the rural areas and small cities where MacGillis has spent so much time as a reporter—Amazon’s role in making economic hardship more entrenched is no less stark. In El Paso, Texas, Amazon has aggressively marketed itself to the city government as a go-to source for office supplies—which has pushed local purveyors to open up online storefronts on Amazon; a large cut of their sales goes to the corporation. In York, Pennsylvania, the headquarters of the once-fashionable Bon-Ton department store has been made extinct by Amazon and the broader retail consolidation it represents. The crisis of unemployment that has ensued is one that Amazon exploits, finding able bodies for its warehouses in nearby towns.

On his home turf of Baltimore, MacGillis explores most intimately the ebbing of human fulfillment that has accompanied Amazon’s promise of high-speed customer service. He profiles Bill Bodani Jr., who spent most of his working life at Bethlehem Steel’s Sparrows Point complex, outside the city. In the early 2000s, a serious injury forced him to retire in his mid-50s, around the time that foreign competition and other factors pushed the company into bankruptcy. Eventually, the Sparrows Point plant shut down and Bodani’s monthly pension payment was cut from $3,000 to $1,600. Now 69 years old and back at work as a forklift driver in a 22-acre Amazon warehouse, he returns every day to the exact same piece of land. The peninsula has been rebranded—it’s called Tradepoint Atlantic now—and has become what MacGillis calls an “all-purpose logistics hub” that houses, among other facilities, an Amazon fulfillment center.

While Amazon is not the only major corporation that could claim to have a a large impact on so many places in the United States (think Walmart, McDonald’s, and a few others), it’s particular reach and impact might just be unique. With an ability to reach millions of customers in their homes, tech workers in a lot of locations, and fulfillment centers spread across the country, Amazon reaches across multiple sectors and job segments.

This means that its impact on particular places could be quite disparate. Take the Chicago region as an example. Like many places, Chicago wanted Amazon HQ#2. This would add to both office workers in downtown Chicago as well as many more in fulfillment centers around the region. Yet, Amazon’s locations received more money from some poorer suburbs.

Each of these Amazon locations, high-tech or not, has the potential to shape the character of communities. Consider the fate of places like Elwood, Illinois that rely on warehouses and distribution centers. Is an Amazon fulfillment center a good trade-off in the long run? Does the chase for a new headquarters or some higher-quality jobs in corporate offices encourage communities to offer tax breaks and more? What kind of local citizen is Amazon – does it participate in and contribute to local activities, do its buildings and its footprint positively contribute to civic life?

Amazon my be global but it is local for many communities. How it interacts with these numerous local contexts may help decide its long-term fate.

$741 million in tax incentives for Amazon in NE Illinois – with a bigger price tag for economically challenged communities

Amazon has constructed 36 facilities in the Chicago region since 2015. And they got a lot of help from taxpayers in disadvantaged communities:

WBEZ

To help pay for its vast expansion, the company and its developers have won at least $741 million in taxpayer-funded incentives in northeast Illinois alone, according to a Better Government Association/WBEZ investigation…

Amazon collected less than $100 million in public incentives for the 15 warehouses it built in predominantly white communities but won more than $640 million in taxpayer incentives for the 21 projects built in communities with larger nonwhite populations, the examination found. Many of those communities are either mostly Black, mostly Latinx or have higher concentrations of low-income residents, and with municipal budgets already short on cash.

Records show the three largest incentive packages Amazon received — totaling $512 million — all came from predominantly Black suburbs. By contrast, the company built warehouses in at least seven mostly white communities that reported offering no public incentives at all…

While many of the communities may get more jobs, experts interviewed say the lost revenue from taxpayer incentives will strain public resources to rebuild crumbling roads from the truck traffic, mitigate pollution from the exhaust fumes and noise and to pay for other services such as police protection and fire prevention.

That big companies seek out tax breaks and local incentives is not new. Amazon played the game on a grand scale with its proposed second headquarters.

But, this illustrates one of the problems with tax breaks in general: it is a race to the bottom. Companies look for communities that will have a hard time saying no. What mayor or local official wants to turn down local jobs? Or, turn away a big company with the status like Amazon? Once they have such a company in town, communities often build on this when marketing land and facilities to other firms by saying they are home to Amazon.

Yet, the deal may not be a good one. Jobs are not the only factor that matters in a community. As the story above notes, traffic, pollution, noise, the strain on local budgets and services, and the quality of the jobs also matter. Does the addition of Amazon or another large company make the community as a whole better down the road?

The system could be improved in multiple ways. All the communities in a region could stop competing in this way; that Amazon locates within one municipality could also have spillover benefits for other communities. One community’s gain is not necessarily one community’s loss; the region operates as a whole. If revenue was shared across a region, then tax breaks in a particular community would matter less. Or, communities could just commit not to offer tax breaks at all. If companies cannot play the game, they would have to locate places for other reasons.

These possible solutions do not solve the underlying issues: jobs and capital in a metropolitan region are not evenly distributed. Patterns by race and class continue for decades as companies, residents, and other seek out particular locations and not others. That some communities have to pay more for Amazon to locate there just compounds the problem.

The expansion of warehouses in sprawling locations

While the example here is from Georgia, this describes a lot of development in the United States today:

An announcement this week says that the Goodyear Tire and Rubber Company will anchor a new industrial park being developed on the property. The company will occupy 1.5 million square feet of warehouse space, in what the Atlanta Business Chronicle calls the “largest build-to-suit industrial space under construction in metro Atlanta.” Goodyear is expected to employ about 150 Georgians in the facility.

Individually, headlines like this represent wins. Jobs are created, and local tax bases are fortified. Warehouses, in particular, tend to bring in significantly more in property taxes than the businesses that occupy them demand in county services such as public safety. Their byproduct, however, is traffic. Specifically, truck traffic…

The middle stage of both manufacturing and distribution requires warehouses, and Georgia’s geographic position and our ports and airport logistics hubs make the warehousing industry a logical fit for the state. This extends from the Port of Savannah all the way down I-16, up I-75 into metro Atlanta, and all the way around the metro area and into North Georgia. It’s truly a statewide issue.

And much like the projected cascade of new residents, new warehouses are coming. There is a proposal to build out 1,400 acres with 18 million square feet of warehouse space in Butts county, about half way between Atlanta and Macon. Seven hundred acres adjacent to the Budweiser brewery in Cartersville, northwest of Atlanta, have also been sold to be developed as warehouse space.

To make a world of Amazons, Walmarts, and Walgreens possible, trucks are needed. Lots of trucks. The warehouses need to be in strategic locations near growing populations so that the time between warehouse and store or delivery is reduced. To make one or two day delivery possible or have real-time inventory, there need to be locations that have a lot of goods ready to go. Black Friday or the Christmas retail season cannot happen as easily without warehouses.

As noted above, warehouses provide jobs and property taxes. They are not often aesthetically pleasing as the primary goal is to store goods, not interact with the public. They often occupy key sites in and around intersections and highways. They contribute truck traffic. I would guess few people would want to live right next to one given the noise and lights involved.

All of this connects to sprawling development in the United States. American communities tend to be spread out as people seek out single-family homes of a certain size and with enough distance from communities they might find problematic. Decades of sprawl fueled by the American Dream, the federal government, and numerous other actors means that warehouses are a common part of the landscape. Outside any major metropolitan area, there are rows upon rows of warehouses.

For another example of how this all plays out, see the rise of intermodal facilities (and the negative effects these can have on communities).

Inside Amazon’s fulfillment centers

If Walmart is where normal America gathers, then here is where much of the stuff Americans order online comes from: Amazon fulfillment centers.

For its “Amazon Unpacked” series, UK’s The Financial Times Weekend Magazine got photographer Ben Roberts a pass into the hyper-systematized environs of one of Amazon.com’s ginormous—roughly the length of nine football fields—fulfillment warehouses. The facility in Rugeley, England, is an expansive structure flooded with natural light and imbued with the sterility and efficiency of a major hospital. Here, employees can walk between seven and 15 miles a day, and they don’t meander; the warehouse gets 35 orders a second and worker productivity is measured via handheld device. Architizer calls it “a warehouse employee’s worst nightmare,” but with all the organization, light, and crisp colors, the space seems pretty ideal for a warehouse—particularly if an employee were training for a 10K or something.

When looking at these pictures, they seem like they could either represent the possibilities of our future (think of what is on all those shelves!) or represent cold, calculating buildings that are all about feeding a consumerist economy in the most efficient way. Either way, their scale alone is impressive.

Combined with my post over the weekend about subway facades, these images could be part of a larger series on the infrastructure behind the 2013 world. When people order from Amazon, they are not likely to think about all that it takes to get the product from a factory to a distribution center and then to their door/mailbox. Yet, they know it all works and like the results. Or, think about the data centers built in places like Iowa to handle all of the information flowing through the Internet. Or, the distribution centers behind Walmart or that helped Netflix quickly ship out DVDs years ago. All of this is relatively hidden in faceless warehouses away from the consumer.