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Tech companies including Amazon’s cost-cutting put pressure on commercial real-estate market

Picture: TechCrunch

The commercial real estate sector is facing a problem as technology companies reduce demand for office space.

Companies such as Amazon, Microsoft, and Alphabet have driven demand for office space, supporting building values in cities such as New York, San Francisco, and Washington, D.C.

However, these companies are now canceling leases, putting space up for sublease, and scaling back plans to buy or build offices as they lay off workers and look to cut costs. This is putting pressure on building owners who are already struggling with weak demand from other industries and a rise in interest rates.

According to CBRE Group Inc., tech companies accounted for just 17% of the country’s biggest office leases last year, down from 36% the previous year. The tech industry no longer leads U.S. office leasing for the first time since 2013, and with more tech companies allowing remote work, they need less space per employee.

According to CBRE Group Inc., the surplus office space leased by tech companies and available for sublease has more than doubled to 142 million square feet between the end of 2019 and the summer of 2022. Among tech companies, Amazon has always been known for its high demand for real estate.

As of October 2022, Amazon had leased 19.7 million square feet of U.S. office space, almost three times more than Apple Inc., according to BMO Capital Markets analysis based on CoStar Group data.

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