Amazon To Slash Office Vacancies in Coming Years, Move Could Be a Blow to the Commercial Real Estate Market

Amazon could be planning to reduce its office vacancies in the coming years, according to a new report.

Amazon is allegedly letting certain office leases naturally expire. The company is also stopping the use of some of its office floors and negotiating an early lease termination for some buildings. The move is part of the e-commerce giant's effort to reduce its office vacancies, which is expected to be done within the next five years, a person familiar with the matter told Business Insider.

Currently, Amazon's office vacancy rate is 33.8%. This was the result of the company's slower growth rate and recent layoffs. However, the company aims to reduce that number to 25% by the end of this year and 10% over the next five years.

Amazon's move could save the company about $1.3 billion in annual operating-expense savings, the outlet reported, citing internal documents it obtained.

In addition to slashing office vacancies, Amazon was also reported to be mandating employees to relocate to central "hubs" so it can use less office space in non-"hub" locations, the Insider reported, citing leaked messages. Employees who refuse to relocate with either be required to find a new job internally or voluntarily resign.

How Could Amazon's Move Affect the Commercial Real Estate Market?

While the e-commerce giant would cut back on its operating costs if it slashes office vacancies, the move could deal a blow to the commercial real estate market, which is already reeling from soaring vacancy rates following a boom in remote working and retrenchment by big companies.

Some states in the U.S. have seen an alarming increase in office vacancy rates. In San Francisco, for instance, the office vacancy rate hit 36.6% in the first quarter of this year. The city is home to a variety of Amazon teams, including Amazon Web Services, Amazon Digital Music, and Prime Now.

New York also saw office vacancy rates soar to 20% this year. Amazon recently opened a billion-dollar office at 424 Fifth Avenue to entice its workers back to the office.

In comparison, the national office vacancy rate is 17.9% as of the first quarter of 2024, marking a 140-basis-point increase year-over-year.

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