Amazon plans to save around Rs 10,000 crore by reducing office vacancies

In a bid to streamline operations and cut costs, Amazon is reportedly gearing up to significantly reduce its office vacancies, with plans to save a staggering $1.3 billion (around Rs 10,000 crore) in the coming years. This strategic decision, discovered through internal documents obtained by Business Insider (BI), reveals the tech giant's latest take on being more financially efficient.

The cited report says that Amazon is currently facing an office vacancy rate of around 34 percent, and Amazon now wants to take a series of targeted measures to address this issue. These include allowing leases to naturally expire, ceasing the use of certain office floors, and negotiating early terminations for select buildings. By implementing these strategies, Amazon aims to not only optimise space utilisation but also make substantial annual savings.

The company's ambitious plan foresees a sharp decline in office vacancies, with projections indicating a reduction to 25 per cent by 2024 and further plummeting to just 10 per cent over the next three to five years. This significant decrease is expected to offer significant cost savings, as outlined in the internal document obtained by BI.

"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. In some cases, employees may move buildings to increase collaboration and drive better utilisation 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," Amazon spokesperson Brad Glasser said.

While the major focus of this decision is to improve operational efficiency, Glasser asserted that the latest move is different from the company's return-to-office (RTO) policy. Instead, the objective is to align office space with the evolving needs of Amazon's workforce.

"To suggest that this is about anything else – such as our expectations for working in the office – is at best a misunderstanding and at worst intentionally misleading. 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. We'll continue to communicate directly with employees and our partners about any changes to their space, as we always do," Glasser clarified to India Today.

Besides, just recently, it was reported that Amazon has decided not to increase base pay for several senior employees this year. This move is attributed to a significant spike in Amazon's stock prices, which have risen by more than 75 per cent over the past year. Given the crucial role stock plays in employees' compensation, the spike in stock prices typically translates to higher overall earnings. However, it also provides Amazon with grounds to restrain from increasing cash-based salaries.

Amazon has distributed internal guidelines to managers to address potential employee inquiries regarding the decision not to increase base pay. These guidelines, disclosed in a Q&A document, instruct managers to explain the absence of pay raises by pointing to the significant rise in Amazon's stock price as this increase has led to many employees' total compensation exceeding the predefined pay range for their positions.