Leaked document shows Amazon, $AMZN, expects to save $1.3 billion by slashing office vacancies and terminating leases early

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Leaked document shows Amazon, $AMZN, expects to save $1.3 billion by slashing office vacancies and terminating leases early.Amazon is reducing its office space by allowing certain leases to naturally expire, halting the use of some office floors, and negotiating early lease terminations for some buildings, according to a source familiar with the matter who requested anonymity due to the sensitivity of the issue.The company currently has an office vacancy rate of 33.8%, which is expected to decrease to 25% in 2024 and further decline to 10% over the next three to five years. This strategic shift is projected to result in approximately $1.3 billion in annual operating expense savings, as outlined in an internal document.The high office vacancy rate of nearly 34% is attributed to slower growth and layoffs within Amazon, the source informed BI.Reducing the vacancy rate to around 10% in the coming years will add pressure to the commercial real estate market, which is already facing challenges from the surge in remote work, overbuilding, and cutbacks by major companies like Google and Meta.Fitch, a rating agency, recently cautioned that the decline in US office values could rival or surpass the real estate collapse of 2008, as prices have yet to reach a bottom.Amazon's office downsizing is part of a broader cost-cutting strategy that includes discontinued projects, scaled-back expansion plans, and the largest layoffs in the company's history.In a statement to BI, Brad Glasser, a spokesperson for Amazon, stated that the company regularly reviews its real estate portfolio based on the evolving needs of its businesses."We're 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," Glasser said. "In some cases, employees may move buildings to increase collaboration and drive better utilization of our workspaces. In other cases, we may take on additional space where we're currently limited or make adjustments where we have excess capacity. The changes we've already made are improving vacancy rates, and we expect to see further progress as we continue to learn and iterate on our portfolio."