Amazon Shelves Plans to Build Austin-Area Fulfillment Center

Amazon has informed Austin planning officials in the Austin suburb of Round Rock, TX that it is putting on “hold” a $250M fulfillment center the e-commerce giant was planning to build on a 193-acre site an Amazon subsidiary purchased for development in November.

According to a report in the Austin Business Journal, Amazon told the officials in Round Rock that it is considering canceling the warehouse project. 

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

Austin Business Journal reported in November that a subsidiary tied to Amazon had purchased 193 acres on County Road 172 in Round Rock. Officials had submitted documents to annex and rezone the site, but the item has not come to the city for a public hearing since then, ABJ reported.

The decision to put the fulfillment center project in mothballs was considered a major setback by city officials who were counting on Amazon to remain on a trajectory to become the region’s largest employer, ABJ reported. As of the end of 2021, Amazon had more than 11,000 employees in the Austin metro.

In a statement regarding the Round Rock site, Amazon cited its Q1 2022 earnings report, when it disclosed a loss of almost $4B—Amazon’s first loss since 2015—and admitted that it overestimated the growth of e-commerce when it doubled the footprint of its distribution network during the pandemic.

“(Amazon) 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,” Amazon’s statement said.

Amazon’s confirmation that it is pausing the Round Rock project has officials in Georgetown, TX wondering if the e-commerce giant might shelf a fulfillment center the company was planning to build at the 114-acre Gateway35 Commerce Center under development by Titan Development. According to Williamson County property records, a Titan subsidiary sold 56 acres to an Amazon subsidiary in December.

Citing anonymous sources “familiar with the situation,” Bloomberg reported earlier this month that Amazon is considering subleasing at least 10M of its estimated 370M SF of leased warehouse space and could vacate even more of its gargantuan industrial footprint by ending some leases.

Amazon’s excess storage capacity includes warehouses in New York, New Jersey, Southern California—three of the tightest industrial markets in the US, each filled to capacity—and Atlanta, Bloomberg reported, adding that one of its sources said the overall amount of space Amazon needs to cull may total as much as 30M SF.

The Bloomberg report also indicated that Amazon may “hedge its bets” on its industrial space needs by offering sublease terms of one or two years so the e-commerce titan can re-occupy the industrial space quickly if online sales surge again to pandemic levels.