Office vacancies persist as Amazon bets big on warehouses and fulfillment centers
While major tech players like Google are rapidly scaling back their real estate footprints, Amazon is moving in the opposite direction, ramping up development plans for logistics and data center facilities across the US despite global economic headwinds and rising construction costs.
Google, once one of the Bay Area’s largest corporate tenants, continues to offload sizable portions of its office holdings. The company has now listed another 400,000 square feet of office space in Redwood City, according to the Silicon Valley Business Journal.
The latest listings span four buildings at the Pacific Shores Center, including one classified as a life science facility. Amenities include a swimming pool, full-service health club, sports fields, and courts—features reminiscent of the lavish perks that characterized peak-era tech campuses.
The newly listed properties come on the heels of Google’s decision last year to put over 1.4 million square feet of space in Mountain View and Sunnyvale on the sublease market. By May 2024, the company had also vacated its 300,000-square-foot office in San Francisco’s One Market Plaza. All told, Google had held nearly 1 million square feet at Pacific Shores alone but spent $633 million in the first half of 2023 to shrink its footprint.
Despite Google scaling back, office vacancy rates in San Francisco showed a slight improvement in the first quarter, dropping from 36.5% to 35.8%, the second straight quarter of modest recovery, according to the San Francisco Examiner.
Meanwhile, Amazon is doubling down on its real estate investments, signaling confidence in its long-term logistics and fulfillment strategy.
“We have invested and will continue to invest aggressively to expand and leverage our customer base, brand and infrastructure,” Amazon CEO Andy Jassy said in his annual letter to shareholders.
Amazon is currently exploring a $15 billion expansion plan that could bring roughly 80 new logistics facilities to cities and rural areas across the US, Bloomberg reported. The projects under discussion would include delivery hubs and multistory fulfillment centers—many of them robot-powered.
While the proposals are not yet finalized, Amazon has invited capital partners to submit bids as part of its due diligence process.
“Meetings like this with our capital partners are routine and part of the normal due diligence process as we consider potential future projects,” Amazon spokesperson Steve Kelly said in an email.
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Amazon’s infrastructure push comes despite economic hurdles, including the reemergence of trade tariffs. A new 25% tariff on steel and aluminum took effect March 12, raising the cost of key materials used in industrial development. Additional tariffs on lumber, concrete, and imported electrical components could further challenge the feasibility of new construction.
Still, Jassy told CNBC that while tariffs may drive up costs for Amazon’s vast seller network, the company would work to keep consumer prices low.
“Amazon will do everything possible to keep prices low,” he said, while acknowledging that higher input costs may be passed down to customers through third-party sellers.
For warehouse developers and owners, Amazon’s continued expansion is a rare bright spot. Industrial occupancy growth in the US has lagged pre-pandemic levels by 34% over the past year, according to Jesse Gundersheim, senior director of market analytics at CoStar for Los Angeles.
“Amazon’s potential development of another 80 warehouses is significant,” Gundersheim said.
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In the first quarter of 2025 alone, Amazon continued acquiring land and expanding its logistics footprint. The company already operates more than 1,200 logistics facilities across the country, with over 83% exceeding 100,000 square feet. Gundersheim noted that US developers delivered 320 new industrial buildings of that size during Q1 2025, including more than 30 warehouses over 500,000 square feet.
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