Is Amazon headed to Iowa City?

Amazon is investing heavily in its national delivery infrastructure to provide faster shipping to Prime customers. PHOTO AMAZON

By Katharine Carlon
[email protected]

Rumors that e-commerce giant Amazon is eyeing a former Procter & Gamble distribution center on Iowa City’s east side for a “last-mile” fulfillment center appear to have some basis in fact.

Though no lease has been signed and no permits have been applied for, Amazon “definitely has an interest” in the space, said Wendy Ford, Iowa City’s economic development coordinator.

Ms. Ford said a representative of the Seattle-based company visited Iowa City in June to inquire about the more than 346,000-square-foot building located at 2500 Heinz Road. The facility would likely be used as a delivery station, one of Amazon’s smaller-scale fulfillment centers where orders are prepared for last-mile delivery to customers.

The news comes as Amazon seeks to overhaul its national delivery infrastructure to provide faster shipping and reduce reliance on third-party carriers like UPS.

Word has circulated in recent weeks that Amazon was scouting locations in the Corridor, including another site in Tiffin. Ms. Ford confirmed that an Amazon representative walked into Iowa City Hall earlier this summer to inquire about regulations, codes and the possibility of retrofitting the existing Heinz Road building for the company’s purposes.

“This was not by any stretch someone from the C-suite,” she said. “These were casual inquiries … But I got the feeling this [site] offered pretty much everything they were looking for. They were wanting to make sure there wouldn’t be any major hurdles.”

Ms. Ford said she was not aware of the state of negotiations for the former P&G facility, if any. Mark Nolte, president of the Iowa City Area Development Group (ICAD), did not respond to a request for comment, while Brian Crowe, ICR Iowa’s director of business attraction, declined to confirm whether or not Amazon was interested in the site.

“We don’t comment on active ongoing projects,” he said.

Justin Felix, transaction manager for global commercial real estate firm CBRE, which is marketing the Heinz Road building for sale or lease, said he was bound by a non-disclosure agreement from discussing the identity of the tenant negotiating for the property.

“I can say the deal is progressing along,” he said. “We’ve been in talks for several months and things are trending positive.”

Mr. Felix said his unnamed client was also negotiating with the state of Iowa for economic incentives. Jacque Matsen, marketing and communications director for the Iowa Economic Development Authority, said her agency could not discuss confidential negotiations until incentives were ready to come before the IEDA board.

According to CBRE’s listing, the former Heinz Road distribution center offers 346,062 square feet on a 26-acre site and would rent for $3.50 a square foot per year on a triple-net lease.

Amazon is on something of a spending spree after announcing free one-day shipping for Prime members earlier this year. In a recent earnings call to explain why its record-setting profits had flattened, company executives said they had spent more than $800 million in the second quarter of 2019 to build out the infrastructure needed to cut the standard shipping program for Prime customers from two days to one.

Most of that money was spent building out a distribution network, including new delivery stations closer to more customers. The company is also working on controlling its delivery process from start to finish.

“It does create a shock to the system,” Amazon’s Chief Financial Analyst Brian Olsavsky said on a July 25 earnings call. “We expect we’ll be working through that for a number of quarters, but when the dust settles, we will regain our cost efficiency over time.”

According to supply chain and logistics firm MWPVL, Amazon has 117 active delivery stations, with 11 under construction as of this month. The only listed Iowa fulfillment center is an 18,000-square-foot delivery station on 250th Street NW in North Liberty, near the intersection of Half Moon Avenue NW, which opened in 2018.

Amazon operates six types of fulfillment centers, from cavernous 1 million-square-foot “non-sortable fulfillment centers” that employ more than 1,000 full-time associates who pack and ship bulky or oversized items, to the smaller delivery stations that serve as a last stop before items appear on customers’ doorsteps.

According to Amazon’s employment website, delivery station positions offer mostly part-time overnight shifts of between four and five hours.

Amazon declined to comment on any interest in the site.

“We don’t have anything to share at this time,” wrote Shone Jemmott of Amazon Corporate Communications in an email, “but I can certainly let you know if that changes.”