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Louisville is the largest city in the Commonwealth of Kentucky and the 29th-most populous city in the United States. It is one of two cities in Kentucky designated as first-class, the other being the state’s second-largest city of Lexington. Louisville is the historical seat and, since 2003, the nominal seat of Jefferson County.
Louisville was founded in 1778 by George Rogers Clark and is named after King Louis XVI of France, making Louisville one of the oldest cities west of the Appalachian Mountains. Sited beside the Falls of the Ohio, the only major obstruction to river traffic between the upper Ohio River and the Gulf of Mexico, the settlement first grew as a portage site. It was the founding city of the Louisville and Nashville Railroad, which grew into a 6,000-mile (9,700 km) system across 13 states. Today, the city is known as the home of the Kentucky Derby, Kentucky Fried Chicken, the University of Louisville and its Louisville Cardinals athletic teams, Louisville Slugger baseball bats, and three of Kentucky’s six Fortune 500 companies. Its main airport is also the site of United Parcel Service’s worldwide air hub.
One Amazon FBA fulfillment center in Louisville KY:
#SDF2 – 4360 Robards Ln Louisville, KY 40218 – Jefferson County
– Digital editor , Louisville Business First
The giant’s shadow is only getting bigger.
In recent weeks, we’ve reported on how retail giant Amazon.com Inc. is expanding its operations in Louisville. Locally, that growth includes a new last-mile delivery station facility near Watterson Expressway, which we first reported on in January. The company is building a 142,000-square-foot office and warehouse, with heavy truck loading and unloading areas, at 1231 Durrett Lane, near Preston Highway.
Last-mile facilities refer to the final step of the delivery process from a distribution center or facility to a user and are becoming increasingly popular in the U.S. as the demand for faster delivery grows.
Louisville-based real estate firm Poe Cos. is developing the complex on land that had previously been home to a 225,000-square-foot former bank processing center. Poe Cos. purchased it in September 2019 through an affiliate, Durrett LLC, for $5.5 million.
This local growth is consistent with a national trend because, as the pandemic has stretched on, Amazon has only gotten bigger. According to Consumer Intelligence Research Partners, membership in the company’s Amazon Prime program has climbed to an estimated 142 million, the Puget Sound Business Journal, a sister publication to Louisville Business First, reported in January.
The company has added 30 million shoppers in the past year, CIRP estimates. It’s the highest proportion of Amazon customers using Prime since the researchers began studying the program in 2012.
Meantime, Amazon’s grocery business has claimed the top spot in a prominent annual ranking of grocery retailers done by Dunnhumby, a global consumer data science company.
So considering that impressive growth trajectory, where does Louisville fit into the company’s future plans? As usual, it is tight-lipped when it comes to strategy specifics.
“Amazon is a dynamic business and we are constantly exploring new locations,” the company said in a statement in January. “We weigh a variety of factors when deciding where to develop future sites to best serve customers, however, Amazon has a policy of not commenting on our future roadmap.”
For this story, we also reached out to several local commercial real estate experts, who declined to speak specifically about the company.
Growth part of a national trend
Amazon has expanded its logistics network at a staggering clip. And the expansion comes as the Seattle-based company has hired 400,000 workers in the past several months, bringing its total headcount to nearly 1.2 million in October 2020, a 50% increase in less than a year.
The company said last summer that it planned to increase its warehouse capacity by 50% before the end of 2020. By comparison, Amazon’s logistics square footage increased by 15% in 2019.
Research by the Business Journals shows that, as of last October, the company has at least 70 logistics facilities in development across the U.S.
In addition to the latest development in Louisville, it’s also made announcements about centers in Kansas City, Omaha, Nebraska, and Fargo, North Dakota.
That Amazon is investing so heavily in warehouse space suggests the company believes consumers’ reliance on online shopping will stick beyond the pandemic. More still, by moving aggressively to place more distribution hubs near consumers’ homes, Amazon is getting closer to its ultimate goal of dropping packages on doorsteps within a day or even hours.
“I think this is a big opportunity for Amazon,” Patrick Penfield, a professor of supply chain practice at Syracuse University’s Whitman School of Management told Business Journals last year. “They’ve got big plans.”
Warehouses built to fulfill online orders need to be three times bigger than traditional warehouses, according to a report from Turner & Townsend, the United Kingdom-based investment advisory with expertise in warehouse logistics. That’s because e-commerce operations sell a wide range of products, and workers need to be able to easily get to those products, the report said.
Amazon’s sorting centers are highly automated with advanced robotics helping to sort and pick packages. Early in 2020, the company said that collectively those facilities can ship as many as 1 million packages in a day. That number rises with each new warehouse that comes online. And each of those Amazon delivery vans you see on the road — also ever increasing in number with each new distribution center — makes as many as 180 stops in a single shift. That’s one delivery every 2.6 minutes.
Amazon is reaping record profits during the pandemic as other sectors of the economy have declined. That means the company has more than enough capital to outspend its competition on warehouse space.
That said, Amazon owns at most only 4% of its warehouse space and leases the rest, Penfield estimated.
“So they can expand pretty fast,” he said.
The company, Penfield said, has the help of a network of partners, including construction companies, logistics consultants and a handful of big landlords to rush the projects to completion.
“Warehousing wasn’t thought of as very sexy at one time,” Penfield said.
Amazon's effect on Louisville
The Louisville area has long been a part of Amazon’s operations.
Like nearly every major city in America, Louisville made a bid to land Amazon’s second headquarters back in 2017 when the company announced plans to expand. Kentucky offered Amazon.com Inc. up to $2.5 billion in an economic incentives package as part of a joint bid with Indiana at the time. That wasn’t enough, it seems. Arlington, Virginia, near Washington D.C., ultimately won that competition and it’s seen the company dig in since with new projects in that area.
For Louisville, Amazon’s footprint is mostly concentrated in logistics and warehouse spaces.
Major fulfillment centers are just to the north and south of the city in Jeffersonville, Indiana, and Shepherdsville, Kentucky, respectively. And more recently, Louisville itself has become home to several smaller facilities.
On a national level, the company is often the subject of criticism because founder and CEO Jeff Bezos is the world’s richest person, according to Forbes, and the company’s workers generally start out at a fairly low $15 per hour doing manual labor. (Bezos announced recently he’ll step down as CEO in the third quarter, but will remain chairman).
That wage disparity is not lost on us. But here in Louisville, the company’s decision to start its workers off at that rate has actually had an effect on the market as a whole, said Michael Gritton, executive director of KentuckianaWorks, the region’s workforce development board.
Five to 10 years ago, he said, the agency used to hear a lot more complaints from companies in the logistics industry who said they couldn’t find people to hire. Back then, the pay range was in the $11 to $12 per hour range for logistics jobs.
When Amazon decided to increase its pay to start workers at least $15 per hour wage in 2018, that forced pay levels for others to go up as well.
“Raising the entry-level wages has made a big difference in attracting people to those jobs,” Gritton said.
That’s important because logistics workers are the largest category of jobs in the Louisville area, said Sarah Ehresman, director of labor market intelligence for KentuckianaWorks. About 26,000 jobs in the area are classified as such and had a median wage of around $29,300 in 2019.
At the moment, the job market for these workers is not nearly as tight as it used to be considering the Covid-19 pandemic has put so many people out of work, especially in the food and hospitality sector, Ehresman said.
Amazon also employs a significant number of people in the Louisville area. The company comes in at No. 12 on our most recent list of Louisville’s largest employers with about 5,700 workers.
And of course Gritton is not the only one who sees the benefit of the company growing here.
“Amazon’s presence in our region has been mutually beneficial to both our regional economy and their innovative business model which is based on efficiency,” said Sarah Davasher-Wisdom, president and CEO, of Greater Louisville Inc., the area’s chamber of commerce. “Our location and strong logistics infrastructure makes Greater Louisville a great fit for their needs. Amazon has in turn brought positive attention to our ground logistics assets helping to increase our reputation as a logistics hub and attract new logistics-based businesses to the area.”
E-commerce in Louisville
Since its founding, one of Louisville’s key strengths has been its location. Major interstates crisscross here. The South and the Midwest meet on their respective banks of the Ohio River.
And Louisville’s location is arguably made much more lucrative for companies in the e-commerce business by the fact that United Parcel Service Inc.’s Worldport, the shipping company’s largest air-package sorting hub, is located here, too.
Considering that, Louisville already has a fairly robust e-commerce sector, not just with Amazon but other companies like Radial Inc., GameStop, Chewy.com and Jet.com having operations in the area.
Recent research from commercial real estate firm JLL says demand for e-commerce space is going to continue to grow in Louisville, and that’s even as the industrial warehouse market has been booming.
Louisville needs to add at least 14 million square feet of industrial construction during the next five years based on e-commerce demand projections, according to the research, which we first reported on in February. That 14 million figure is called a conservative estimate in the report, and JLL believes the area is well-positioned to capitalize on the demand considering the aforementioned highway connectivity and UPS operations.
The new JLL research also found that bulk industrial construction activity within the Louisville market increased more than 190% from 2016-20 compared to 2011-15.
This data comes after JLL issued new projections last summer that found e-commerce sales, already approaching $1 trillion annually, could grow to $1.5 trillion by 2025 in the U.S. That increase would create the demand for an additional 1 billion square feet in industrial real estate.
JLL Louisville Managing Director Powell Spears said the Covid-19 pandemic “poured jet fuel” on nationwide e-commerce growth, which was already growing at a steady pace prior to the pandemic.
“Covid forced a whole new demographic to adopt all new e-commerce and online purchasing habits,” Spears said, adding that the success is not limited to major players such as Amazon.com.
The building footprint for e-commerce users typically ranges from 50,000 to 1 million square feet, in some cases larger, said Spears. As the space requirement increases, the pressure to optimize the utilization of space changes.
As a result, these large warehouse buildings have gotten taller, going from a typical 32-feet clear to 40-feet clear in the last 10 years, he said.
“LED lighting, larger speed bays, fully equipped dock doors, cross-dock loading, trailer storage areas, proximity to the highway and large automotive parking options are all features that can tip the scales when e-commerce tenants are selecting buildings,” he said.
Future workforce opportunities
Davasher-Wisdom said she believes that e-commerce is going to play an important role in the Louisville area’s future, particularly as businesses continue to integrate it into their cultures with the pandemic.
There’s an opportunity for the area because, as the e-commerce industry gets more technologically advanced, the need for skilled workers trained in working on those automation systems will increase, she said.
And there’s still purpose for the warehouse jobs that we have now, not just the ones in the future, said Rebecca Fleischaker, co-chief of Louisville Forward, the city’s economic development arm.
In terms of incentives, the city as well as state leaders are looking to bring jobs that pay at least $18 per hour, in order to increase Louisville’s median wage. But, she acknowledged that a diverse workforce needs multiple entry points for workers that are just getting started, she said.
Louisville can still use its location to attract logistics jobs but she said the city is looking at more technical offerings in that field, such as health care logistics.
Health care of course is another big cluster in Louisville.
“It’s kind of cool where our clusters come together and where they match up,” she said
Louisville Business First Reporter Marty Finley and Tony Lystra of the Puget Sound Business Journal contributed to this story.
BY THE NUMBERS
Amazon in Greater Louisville
Number of local Amazon facilities, including smaller properties and proposed facilities: 33
Number of major fulfillment centers: 2
Number of local Amazon employees: 5,700
Amazon in total
Headquarters: Seattle, Washington
Employees: More than 1 million (according to Washington Post, October 2020)
2020 net sales: $386.1 billion
202 net income: $21.3 billion
Stock price (Feb. 25): $3,097.93
Amazon jobs in Louisville, KY
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Amazon Delivery Station Warehouse Associate
Delivery Associate Driver
Mollison Logistics, LLC, (partnering with Amazon...
Louisville, KY 40218
Driving Delivery Associate
Amazon Associate Driver Helper
Mollison Logistics, LLC, (partnering with Amazon...
Louisville, KY 40218
Delivery DRIVER Associate
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