Hartford Business Journal

26 HARTFORDBUSINESS.COM | June 6, 2022 FOCUS: Industrial Real Estate BEFORE AFTER Amazon's distribution center expansion pullback inspires apprehension in towns eager for growth By Michael Puffer mpuffer@hartfordbusiness.com A mazon's plan to curb its aggressive logistics network expansion following a $3.8 billion first-quarter net loss has sent tremors of unease through some Connecticut communities where the e-commerce giant was eyeing new distribution facilities — a potential source of significant new jobs and tax revenues. In Plainfield, Town Planner Mary Ann Chinatti read with apprehen- sion news spilling out of Amazon's April 28 earnings report. A roughly 200,000-square-foot "last-mile" fulfill- ment center under construction in her town just off Interstate 395 is expect- ed to bring 400 to 600 jobs. That center was originally planned for a May opening, but supply chain difficulties have held up progress. However, Chinatti said her con- cerns were soothed in an early May meeting with Amazon representatives who assured the project is moving forward, with completion now antic- ipated in December. They asked for the town's help setting up a job fair, she said. "I have been reading they were overambitious, but that's not the case here, which is good," Chinatti said. "It's going to be a wonderful addition to the town and area. It's going to bring a lot of jobs. It's going to put a lot of people to work, and that's the goal." The Plainfield project is being led by Exeter Property Group, a Pennsyl- vania-based real estate investment and development firm. Amazon and Exeter did not re- spond to requests for comment. Pause button In Waterbury, officials said they have received assurances from a development group proposing a massive Amazon regional distribution center in the city, but that a small- er last-mile fulfillment center is "on hold." "From our per- spective, the Wa- terbury-Naugatuck Industrial Park project is full steam ahead," Thomas Hyde, CEO of the Naugatuck Val- ley Regional Development Corp., said of the larger of the two projects, planned for a roughly 157-acre prop- erty with portions in Waterbury and Naugatuck. Bluewater Property Group — another Pennsylvania developer — signed a $2.5 million purchase- and-sale agreement for the land in mid-May, Hyde said. The company has put down a $100,000 deposit and is moving forward with expensive site plan studies ahead of design, Hyde said. Bluewater did not respond to a request for comment. However, developers have "hit the pause button" on a planned $25 mil- lion East Main Street last-mile Amazon facility in Waterbury that had won land- use approvals, Mayor Neil O'Leary said. The proposal could still move forward, O'Leary said, but he was not able to disclose further details. Phil DiGennaro, the Trum- bull-based developer behind that last-mile proposal, did not respond to a message seeking comment. Rough quarter In an April 28 earnings call with investors, Amazon Chief Financial Officer Brian Olsavsky blamed sev- eral factors for the company's multi- billion-dollar loss. Higher gas prices and the war in Ukraine were factors outside the company's control, but he also blamed overdevelopment of labor and facilities. The omicron variant in late 2021 substantially increased worker ab- sences, Olsavky said, prompting new hires to cover that lost productivity. "As the variant subsided in the sec- ond half of the quarter and employ- ees returned from leave, we quickly transitioned from being understaffed to being overstaffed, resulting in low- er productivity," Olsavsky said during the earnings call. That alone trans- lated to about $2 billion in losses, compared to the prior year, he said. Olsavsky predicts labor will stabi- lize, as will the ability to build new distribution capacity. He predicted it will take several quarters for Amazon to grow into its excess capacity. "So, we've brought down our build expectations," Olsavsky said. "Note again that many of the build deci- sions were made 18 to 24 months ago, so there are limitations on what we can adjust midyear. That said, we expect fulfillment dollars spent on capital projects to be lower in 2022 versus the prior year. We also expect transportation dollars spent on capital projects to be flat to slightly down." Mixed messages in South Windsor In South Windsor, a sleek driveway marker bearing Amazon's name at a new warehouse built by Scannell Properties was recently covered up with a plain canvas banner bearing the words "COMING SOON." Giant letters spelling out "amazon" and the company's blue arrow logo have been removed from the top of the building. That set a lot of tongues wagging in the development commu- nity and beyond. South Windsor Town Manager Michael Maniscalco said he heard rumors and reached out to Scannell, who reassured him that Amazon is still "lined up to move there." Manis- calco said the sign was erected pre- maturely and that Scannell is putting the finishing touches on the interior of the planned last-mile facility. Asked for an update on the deal, a Scannell spokesperson said the de- veloper is not authorized to comment for Amazon. Mark J. Duclos, president of Hart- ford-based Sentry Commercial, retains a bit of skepticism about the likelihood of Am- azon ultimately inhabiting the South AMAZON BY THE NUMBERS $15 per hour – Starting minimum salary 16,000 – Number of full- and part-time Amazon employees in Connecticut as of fourth-quarter 2021 1.1 million – Number of total Amazon employees at the end of fourth quarter 2021 1.6 million – Number of Amazon employees at end of first quarter 2022 $4 billion – Amount Amazon has spent on employees and infrastructure in Connecticut since 2010 $530 billion-plus – Amount Amazon has spent developing in United States since 2010 Source: Amazon Thomas Hyde Mark Duclos (Left) Last year, Amazon's logo was proudly displayed on the under-construction warehouse property at 240 Ellington Road in South Windsor. In late May of this year, the company's name on the signage (right photo) was covered up and taken off the building. HBJ PHOTOS | GREG BORDONARO, MICHAEL PUFFER

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