Home Depot Exits 3.2M SF Of Warehouse Space In A Month

The world’s largest home improvement retailer has aggressively trimmed its warehouse portfolio in the past month, kicking more than 3M SF back to the market.

Since the end of August, Home Depot put a 1.3M SF warehouse in Phoenix and a 1.1M SF distribution center in the Inland Empire up for sublease, according to CoStar Analytics. Industrial landlord EQT Exeter also recently listed a 772K SF warehouse in Metro Atlanta for lease that Home Depot first occupied in 2021, and a warehouse formerly used by the home improvement company was listed for lease in Chicago in February, according to CoStar.

All told, Home Depot has pulled out of some 4M SF since the start of 2024, or 4% of its 111.5M SF warehouse portfolio. It leases 97% of its storage and distribution space, according to its 2023 annual report, while it owns 89% of its 242.3M SF retail portfolio.

The contraction follows the retail giant’s plans, announced in 2023, to cut costs by $500M by early next year, a plan that included trimming its logistics network.

“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,” Home Depot Chief Financial Officer Richard McPhail said during the company’s 2023 annual conference, according to CoStar.

Persistent high interest rates have affected consumer buying for big projects associated with reduced housing turnover, as existing home sales have dropped the past two years, CEO Ted Decker said during the Goldman Sachs Retailing Conference last month. Decker said housing sales in the U.S. fell by 1.5 million units compared to historic annual averages.

“That’s $15B-odd a year that’s out of our space, so that’s been a bit of a headwind,” Decker said. “Everyone is expecting interest rates to come down at some point, and hopefully housing turnover would return to more historic levels.”

The Federal Reserve cut rates by 50 basis points 14 days after the meeting, and the Fed has signaled it is likely to make additional interest rate cuts this year. 

Home Depot’s supply chain may take further hits from the East Coast port strike that began this week, Quartz reported. The retailer is among the companies that could be disproportionately affected by striking dockworkers, according to a study from Import Genius.

Decker also signaled during the Goldman Sachs conference that the retailer may grab warehouse space in some markets this year. 

“While we’re largely built out on supply chain, there are still some markets that we haven’t built that building material distribution capability,” Decker said. “These are big sites on rail lines, and there’s still some major metros that we haven’t secured that real estate.”