After worst financial quarter in years, Amazon puts plans for large distribution center in Round Rock on hold

After acknowledging that it has excess capacity in its nationwide distribution and transportation network, Seattle-based e-commerce giant Inc. is at least temporarily abandoning plans for a large warehouse in Round Rock.

Amazon — which earlier this month posted its worst financial quarter in seven years — has put on hold the $250 million project that would have resulted in a large distribution center on a 193-acre piece of Robinson Ranch. It’s the first major setback reported in the local industrial sector, which has been the darling segment in real estate since Covid-19 hit.

Austin Business Journal reported in November that a subsidiary tied to Amazon had purchased the land at 2801 County Road 172, which is east of East McNeil Road and north of the State Highway 45 toll road, near the La Frontera shopping center. Officials had submitted documents to annex and rezone the land but the item had not come to the city for a public hearing since.

“Amazon has placed the project on hold indefinitely, and may not move forward on the site in the future,” Brad Wiseman, the city of Round Rock’s director of planning and development services, said in a May 26 email to ABJ.

It remains unclear what Amazon plans next for the site, which public records indicate it still owns. In a statement, the company confirmed it is “pausing the entitlements process related to the site we own in Round Rock. As mentioned in our recent earnings report, demand patterns have stabilized and this provides an opportunity to better match our capacity and demand. We will re-engage with the City and neighboring community when the timeline for this site is more defined.”

But the decision would put a dint in Amazon’s huge presence in the Austin area, where the company is on a trajectory to become the region’s largest employer. It could also open up a key location to other industrial companies or other real estate users.

Amazon (Nasdaq: AMZN) reported 11,000 employees in the Austin area in the first quarter of 2021 — up from 350 about five years ago. For perspective, it took decades for Round Rock-based Dell Technologies Inc., which has about 13,000 employees in the region, and grocery giant H-E-B, with about 19,000 here, to amass such employment numbers.

While much of the new Amazon jobs are related to warehousing and shipping, the e-commerce giant continues to also grow its white-collar workforce in The Domain in North Austin. Thousands more employees are expected to fill new towers; Amazon said in December it leased all the office space in another building up there.

It’s not clear whether Amazon would pause other projects in Central Texas. In November, Amazon was linked to a 518,792-square-foot sorting facility at 2250 N. I-35 in Georgetown, the same address as the 114-acre Gateway35 Commerce Center being developed by New Mexico-based Titan Development Ltd. Williamson County property records show that a subsidiary tied to Titan sold 56 acres to an Amazon subsidiary in December.

Representatives for Titan declined to comment, while officials from the city of Georgetown did not respond to a request for information before publication. Amazon did not respond to a question about the future of the Georgetown project.

The cancelation of the Round Rock project comes at a time when Amazon is feeling the effects of slowing e-commerce business, according to the Washington Business Journal. In the first three months of the year, Amazon posted its first quarterly financial loss, of $3.8 billion, since 2015. It acknowledged in its earnings report that it had built up to meet Covid-related e-commerce demand. Amazon’s real estate footprint topped 387 million square feet as of the end of 2021.

“Capacity decisions are made years in advance, and we made conscious decisions in 2020 and early 2021 to not let space be a constraint on our business,” said Brian Olsavsky, chief financial officer at Amazon, during an earnings call. “During the pandemic, we were facing not only unprecedented demand but also extended lead times on new capacity. And we built toward the high end of a very volatile demand outlook.”

Earlier this week, the Wall Street Journal reported that Amazon wants to sublet a minimum of 10 million square feet, especially in its largest markets, including New York, New Jersey, California and Atlanta.

“It allows us to relieve the financial obligations associated with an existing building that no longer meets our needs,” an Amazon spokeswoman told the Journal on May 23. “Subleasing is something many established corporations do to help manage their real estate portfolio.”

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