Recent headlines have some fretting about Amazon downsizing its warehouse space.

The implication being that business is falling and the prospects are poor for the company.

This is erroneous and shallow reporting.

Amazon may be putting about 10 million square feet of warehouse space up for sublease for the NEXT FEW YEARS.

10 million square feet seems like a lot John! What the heck! No wonder the stock is down! What were they thinking?? Is this the end of the road for the great expansion? Does this mean the stock is doomed? Should I sell?

This is typical pile-on reporting in a traffic accident-prone stock market.

It makes for good headlines but it’s just not important.

Here’s why:

1. Large companies rearrange space requirements all the time.

When you’re big, and Amazon is the biggest, and has been growing (~26% the past three years) you need to build ahead to meet future demand.

There is a shortage of space because Amazon bought or built most of it!

2. All this fear of inflation is because sales of everything are booming – yep, business is booming – and warehouse space is at a premium and Amazon has lots of it.

Maybe more than they need right now but their plans are to need it soon.

3. Even if Amazon subleases 30 million square feet of its space, it added about 180 million square feet in the last 2 years!

The company still plans to ADD MORE SPACE, JUST NOT AS MUCH AS BEFORE.

So, they have some spare capacity for a bit of time.

It’s not like they didn’t fill up most of the doubling of capacity they built THESE PAST TWO YEARS.

4. Vacancy rates in the U.S. market for warehouse space is less than four per cent.

Amazon just might make money on its spare space.

5. In any event, given the growth path for the company, we see little reason to worry about less than 10 per cent of its space being in excess of its current needs.

Successful companies are that because they have a plan for the future and outmaneuver the competition.

Amazon is one of the smartest, best-managed and well-positioned companies for the future in the world.

Don’t worry about Amazon.


Related stories: How Amazon is Solving It’s “Too Much Space” Problem