Amazon is eager to get its corporate employees back to the office for a full, five-day workweek. The problem: it said it doesn't have enough office space to accommodate them all.
The corporate giant is postponing the start date for its escalated in-person requirement for workers based among at least seven offices across the United States, the company told affected employees this week. Those located in cities such as Dallas, Houston and Austin, Texas; Nashville, Tennessee; Phoenix; Atlanta; and New York will have their return dates pushed by at least four months beyond Amazon's initial Jan. 2 deadline.
A majority of the Seattle-based company's corporate workforce — roughly 350,000 employees — will be returning to an Amazon office at the beginning of next year as scheduled, a spokesperson told CoStar News. For some locations, however, "there may be different timelines."
The spokesperson added that "we’re communicating directly with employees in those locations."
Amazon made waves across corporate America when it told employees in September that it would effectively ditch its hybrid-work policy in favor of bringing everyone back to the office full time.
Workers had previously been asked to commute to a physical hub at least three days a week, depending on their department, but CEO Andy Jassy said the change in in-person requirements was needed to strengthen the retail behemoth's corporate culture and stay ahead of competitors.
"We’re going to return to being in the office the way we were before the onset of COVID," Jassy recently wrote in a corporate memo. "When we look back over the last five years, we continue to believe that the advantages of being together in the office are significant. If anything, the last 15 months we’ve been back in the office at least three days a week has strengthened our conviction about the benefits."
It isn't clear how many employees will be impacted by the delayed start dates, earlier reported by Business Insider.
Amazon's office at the One Galleria Tower in Dallas, for example, doesn't have enough space to simultaneously house all of its employees until at least March or April of next year. In Midtown Manhattan, where the company overhauled a former Lord & Taylor department store into a roughly 615,800-square-foot workspace, the Fifth Avenue building won't be able to accommodate workers full time until May.
Back to growth mode
Amazon did not provide details on how it will eventually accommodate all workers returning to a full-time schedule. However, real estate stakeholders across the country are looking to the company as a critical benchmark for the office market's ongoing recovery.
After years of tenants such as Amazon offloading large amounts of space, many landlords are pointing to escalating return-to-office policies as a turning point.
Employers calling their workers back to physical workspaces could translate into boosted leasing activity, executives at BXP and Hudson Pacific Properties have said, with some companies realizing they may have prematurely dumped space they now need.
"We're seeing tenants who had reduced space or were actively planning on reducing space in 2025, come back and sort of begin conversations with us because they believe they've overshot those reductions," Angela Aman, the CEO of West Coast landlord Kilroy Realty, recently told analysts. "Now that they're getting people back into the office more consistently, they have a better sense of what their ultimate utilization of real estate requirements are and are realizing that they're a little bit different."
Amazon over the past several years has aggressively slashed its previously vast office real estate footprint in a move to both trim costs and adjust to its flexible, post-pandemic work policies. It has let some leases expire, prematurely terminated others and has put large blocks of space on the sublease market to weed out office space that had largely been sitting empty since the pandemic's 2020 outbreak.
At the beginning of this year, Amazon spokesman Brad Glasser told CoStar News the company would continue to trim its office footprint as it was "constantly evaluating our real estate portfolio based on the dynamic and diverse needs of Amazon’s businesses by looking at trends in how employees are using our offices.”
Amazon had planned to reduce its current office vacancy rate of nearly 34% to 10% over the next three to five years in an attempt to save about $1.3 billion in annual operating expenses.
With more workers soon to be required back in the office, however, the company could revert back to leasing or buying up large amounts of space, a shift many landlords are hoping will spread among other tenants as they ramp up their own in-person requirements.
While a majority of its global real estate portfolio includes industrial space, Amazon's office footprint spans nearly 40 million square feet around the world, according to CoStar data. The company earlier this month finalized a deal with WeWork to take over about 217,000 square feet of space the coworking operator has been trying to fill at one of its Silicon Valley properties.
The agreement at 401 San Antonio Road in Mountain View, California, came on the heels of a similar arrangement the two companies made in New York in which Amazon signed a 300,000-square-foot lease at 330 W. 34th St.