Amazon to Spend $1.4B Expanding Office Footprint

Amazon has announced plans to open or significantly expand six tech hubs in Dallas, Detroit, Denver, Manhattan, Phoenix, and San Diego. The investment for the e-commerce giant will total more than $1.4 billion and will create 3,500 new tech and corporate jobs.

Perhaps the most notable expansion will be in Manhattan, where Amazon has acquired the Lord & Taylor Fifth Avenue building. Citing unnamed sources, the Wall Street Journal  reports that Amazon purchased the building from WeWork, for more than $1 billion.

The company plans to open a new 630,000 square foot office there. 

In Dallas, Amazon will expand the existing Dallas tech hub at its Galleria location in North Dallas, adding more than 100,000 square feet of space and 600 tech and corporate roles.

In Detroit, the company has or will acquire more than 25,000 square feet of office space that will provide space for an additional 100 jobs. 

Amazon’s Denver tech hub will grow by an additional 100 jobs with the addition of 20,000 square feet of new office space. The roles will join the already existing 10,500 Amazon employees working in Colorado. 

In Phoenix, the company plans a 90,000 square foot expansion at 100 Mill, bringing more than 500 new jobs to the community. 

In San Diego, an addition of more than 40,000 square feet of office space will allow for the creation of 200 new jobs. 

The offices will support various businesses across the company, including AWS, Alexa, Amazon Advertising, Amazon Fashion, OpsTech and Amazon Fresh, among others. The company expects to hire for a variety of roles, from cloud infrastructure architects and software engineers to data scientists, product managers, and user experience designers.

A Cloudy Future for the Office 

Amazon’s announcement comes as numerous companies have signaled that because the work from home experiment has performed so well, they will scale back their office footprints. Other companies, such as Google, are allowing their employees to continue to work from home for at least another year. These and other trends—such as the difficulty of realigning skyscrapers to meet safety protocols—have cast doubt on the future of the office asset class.

Indeed, Colliers recently reported that net absorption fell into negative territory for the first time in a decade in the second quarter. It also pointed out that a longer-lasting pandemic could further erode the sector’s fundamentals. “The longer the pandemic lingers, the greater the likelihood that many of the required behavioral changes that were perceived to be temporary, such as social distancing, online meetings and working from home, will become more entrenched into the culture of the office,” it said.

On the other hand, there is a strong long-term case to be made for the office, according to many landlords and companies. Physical space provides for better collaboration among workers, easier onboarding for new employees and a stronger home for corporate culture, they say.

Boston Properties CEO Owen Thomas made this case earlier this year when he told CNBC that  working from home is not a long-term replacement for physical offices. “The ability to mentor younger employees” and develop company culture are “very difficult to do” over videoconferencing, he said.

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GlobeSt.com is having a Twitter chat this morning on the future of the office asset class and we’ll be discussing Amazon’s move. Please join us for the conversation. For more details, visit here.