Amazon has leased a huge chunk of space in a first-of-its-kind warehouse project in Seattle as the tech giant seeks to cut down delivery times following its shift to single-day shipping.
The Wall Street Journal reported Tuesday that Amazon leased 500,000 square feet in a three-story warehouse developed by Prologis in Seattle’s Georgetown neighborhood. The vertical warehouse is unique to the U.S., per WSJ, though such projects are common in other parts of the world, where trucks can access multiple levels via ramps.
Amazon and Prologis representatives confirmed the lease in response to a GeekWire inquiry.
Amazon has built out a huge network of warehouses over the years to beef up its logistics capabilities and speed delivery. However, they are primarily large single-story structures in less populated areas.
With Amazon’s push to cut its core delivery benefit from a two-day offering to a one-day turnaround, the tech giant is using every avenue to reduce shipping times. That includes building out warehouses closer to congested urban areas to cut down on travel time for packages.
Not only is the multistory warehouse more efficient, per WSJ, it is just minutes from downtown Seattle. WSJ notes that urban warehouses such as the Prologis project are common in Europe and Asia, but have yet to become popular across the U.S. As Amazon, Walmart and others look to speed up delivery times, these types of warehouses could begin to pop up around the country.
WSJ reports that Home Depot is taking about 100,000 square feet in the warehouse as well.
Amazon announced plans earlier this year to shift its free-two day shipping program for Prime members to one day, speeding up delivery times for the company’s most valuable customers. It is currently rolling out one-day shipping first in North America and then internationally. Amazon said in June that free one-day shipping was available to Prime members on more than 10 million products, with no minimum purchase amount.
Amazon forecasted an $800 million expense for the second quarter related to the initiative and in July it said those costs were higher than projected as the tech giant expands capacity with its transportation networks and warehouses.
Based on increased Prime adoption and increased spend per Prime member household from the one-day offering, RBC Capital Markets analyst Mark Mahaney said in a research note last week that Amazon can generate up to an additional $24 billion in total annual revenue. That’s an increase of about 10 percent, based on the company’s 2018 results.