Amazon signed a deal to significantly expand its robotics division in the Boston area as the company's efforts to automate most of its operations translate into demand for more office space.
The Seattle-based online retail behemoth renewed and expanded an agreement for its outpost at the Riverpark business complex in North Reading, a deal that will stretch the company's footprint to more than 139,225 square feet. It has been occupying less than 41,200 square feet since it moved into the property at 400 Riverpark Drive more than a decade ago.
The expanded agreement with landlord Atlantic Management Corp. means the robotics arm will now fill the entire property. Representatives for Amazon and Atlantic, which acquired the building for $20 million in 2021, did not immediately respond to CoStar News' requests for comment.
Amazon has made waves in recent months after the company revealed plans to replace more than half a million jobs with robots as part of a push to automate its distribution and supply operations. While its workforce has more than tripled since 2018 to about 1.2 million people, its automation team is estimating it can avoid hiring more than 160,000 people in the United States that it would otherwise need over the next couple of years as a result of its increasing reliance on robotics.
By 2030, that automation push is expected to allow Amazon to reduce hiring for as many as 600,000 positions.
While that could have implications for the company's office requirements in the long run, for now, it needs the additional space to house the team responsible for making that future possible.
Inching toward a rebound
For the Greater Boston office market, Amazon's recommitment is another notch in the region's strengthening recovery.
Dassault Systemes, another tech company with a hub in suburban Boston, recently renewed the deal for its regional hub that totals just shy of 320,700 square feet across two buildings. The global software company's recommitment to its North American headquarters marked one of the largest office deals in the area since 2020, according to CoStar data. It is among a handful of recent deals that are helping to sustain the region's steady rebound to pre-pandemic levels of activity.
Renewals such as Amazon and Dassault's represent significant wins for landlords with properties on the outskirts of downtown Boston, especially considering the suburban vacancy rate has soared in recent years to more than 20.5%, CoStar data shows. That's a steep climb compared to the region's 10-year average of about 12%, underscoring the deeply rooted challenges suburban Boston landlords have faced in filling large blocks of vacant space as tenants continue to maintain the upper hand.
The Greater Boston office market struggled in the earlier years of the pandemic, as tenants left swaths of space and backed out of lease commitments.
Colliding factors, including a surge in recently constructed properties and high-profile move-outs, helped push the regional vacancy rate to a record high of about 15%, according to CoStar data. That is more than double the levels reported in the years before the 2020 pandemic outbreak.
A flurry of large deals over the past few months, however, has shown that silver linings are beginning to emerge across the city. What's more, large-scale recommitments and expansions have helped Boston break away from a pack of other cities, such as Philadelphia and St. Louis, where tenants continue to use renewals as a means to shrink or altogether cut ties with their office space.