File this under news that isn't going to help the commercial real estate bubble collapse any slower...
Home Depot is hastily exiting warehouse space, to the tune of 3.2 million square feet in a month, according to Bisnow.
Since late August, Home Depot has put up nearly 4 million square feet of warehouse space for sublease, including a 1.3M SF Phoenix warehouse and a 1.1M SF distribution center in the Inland Empire, according to CoStar Analytics.
While this move is part of the retailer's strategy to cut costs by $500M by early 2024, it comes in the midst of a continued bubble in commercial real estate.
The company, which leases 97% of its 111.5M SF warehouse space, has been scaling back its logistics network as part of its cost-cutting efforts, listing additional properties in Metro Atlanta and Chicago earlier this year.
Home Depot Chief Financial Officer Richard McPhail said last year: “We fixed our supply chain holding capacity up to absorb unplanned growth in 2020 and 2021, and we are now gradually reducing that holding capacity as transactions normalize.”
CEO Ted Decker added: “That’s $15B-odd a year that’s out of our space, so that’s been a bit of a headwind. Everyone is expecting interest rates to come down at some point, and hopefully housing turnover would return to more historic levels.”
The Bisnow report says that high interest rates have slowed consumer spending on big projects, with U.S. home sales down by 1.5 million units compared to historical averages.
The Federal Reserve has since cut rates by 50 basis points and signaled more cuts could follow. Decker also hinted at plans to acquire more warehouse space in certain markets this year.
He concluded: “While we’re largely built out on supply chain, there are still some markets that we haven’t built that building material distribution capability. These are big sites on rail lines, and there’s still some major metros that we haven’t secured that real estate.”
