Amazon's Strategic Real Estate Plan to Reduce Vacancy Rate and Enhance Workspace Efficiency

Author: Anusuya Lahiri | March 28, 2024 09:57am

Amazon.Com Inc (NASDAQ:AMZN) is implementing a strategy to cut $1.3 billion in costs by significantly reducing its office space and opting out of leases early. 

Amid ongoing efforts to slash expenses, the tech and e-commerce behemoth aims to utilize its corporate space better, addressing a notable unused portion. 

An anonymous insider and a confidential document back the cost-saving initiative, Commercial Observer reports. 

Also Read: Could Amazon Crack Streaming Ad Market with Prime Video Ads? Company Eyes Major Revenue Boost

Amazon spokesperson Brad Glasser clarified the company’s stance, stating that real estate decisions are made to enhance collaboration, adjust to space needs, and correct for excess capacity. 

He emphasized that these measures are focused on optimizing workspace utilization rather than changing office work expectations, dismissing any other interpretations as misleading.

Currently, Amazon grapples with a 33.8% vacancy rate in its offices. The plan is to reduce this inefficiency to 25% within the year, aiming for a 10% vacancy rate by 2027 to 2029. 

Amazon intends to negotiate early lease terminations and allow some leases to expire without renewal. 

This move follows the company’s recent job cuts, including hundreds earlier this year and around 27,000 in 2022 and 2023, mirroring similar workforce and office space reductions by other tech giants.

Amazon has been at the heart of a notable real estate deal as two Canadian pension funds complete the sale of two downtown Vancouver office buildings, including Amazon’s premises, to Germany’s Deka Group for about C$300 million ($223 million) as per prior reports. 

The transaction for the properties reflects broader market uncertainties driven by increased borrowing costs and changing work patterns, serving as a critical indicator for the commercial real estate sector’s direction amidst adjustments in central bank policies and significant writedowns by office landlords.

The stock surged by 85% in the last 12 months. Investors can gain exposure to the stock via SPDR Select Sector Fund – Consumer Discretionary (NYSE:XLY) and Vanguard Consumer Discretion ETF (NYSE:VCR).

Price Action: AMZN shares traded higher by 0.90% at $181.44 on the last check Thursday.

Also Read: Amazon’s AWS Pushes AI Boundaries With New Chips And Nvidia Partnership

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo via Company

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