Wednesday, April 17, 2024
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HomeReal Estate NewsCommercialAmazon halts construction on 6 new U.S. office buildings 

Amazon halts construction on 6 new U.S. office buildings 

Amazon has opted to put construction of six new office buildings in Bellevue, WA, and Nashville, TN, on hold so it can reevaluate the designs to accommodate hybrid work, according to Reuters and other news outlets. The construction delay is not expected to impact Amazon’s hiring plans, however, per a company spokesperson. The tech giant still looks to create 25,000 jobs in Bellevue and an additional 5,000 in Nashville.

“The pandemic has significantly changed the way people work,” said John Schoettler, vice president of Global Real Estate and Facilities at Amazon. “For our corporate and tech roles, we’ve adopted a hybrid model that offers employees increased flexibility. Each team decides the balance between in-office and remote work that makes sense for them.”

Amazon’s paused projects include portions of the largest office developments underway in the region — Vulcan’s 55 tower, West Main and Bellevue 600, per a recent report from CRE firm Kidder Mathews, The Seattle Times reports. The three projects comprise approximately 3 million square feet.

Amazon noted it will still finish the “core and shell” of most of these projects, as well as the lobby, communal areas and retail spaces. This plan applies to the 555 tower, Towers 2 and 3 at West Main, Tower 1 at Bellevue 600 and The Artiste. Amazon will also finish the working floors up to the 19th floor of the 42-story 555 tower but will halt its construction plans for the second tower at Bellevue 600, according to The Seattle Times.

Uncertainty remains about how many workers will return to their offices full-time, but companies are still holding on to their office space in Bellevue, according to Kidder Mathews. The current office vacancy rate is just 5.5 percent, the lowest in the region.

“Many Seattle developers are waiting to see how market conditions play out,” the CRE firm said in its report.

Meanwhile in Nashville, Amazon will pause construction on a 20-store office tower, GlobeSt.com reports. The building, core, exterior, amenity spaces and shared working areas have been completed, however. If completed, the office tower is expected to nearly double Amazon’s office footprint in Nashville, bringing it to more than 1 million square feet. Amazon finished the building’s twin, a 566,000 square foot tower with street-level retail outlets last summer.

Amazon noted that it is reevaluating its office spaces for the hybrid work environment for why it’s pausing construction, but the stoppages are also due to the company’s overestimating the e-commerce growth rate, according to GlobeSt.com. The overestimation, and in turn an overextension of its logistics network, led to a first quarter $4 billion loss, Amazon’s first quarterly loss since 2015.

Towns throughout the U.S. have felt the brunt of the company’s recent financial woes.  Amazon has had to break the news to city managers and economic development agencies that the new fulfillment centers and accompanying jobs won’t be coming in the near future. It’s likely that many of the giant warehouses waiting to be opened might stay vacant for two years.

Meanwhile, Amazon had to cancel plans to develop fulfillment centers in rural areas where they had already bought large lots of land.

“It’s early days, and like many companies, we’re still learning how these new habits may impact our office footprint,” Schoettler said.

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