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Amazon Web Services, one of the larger tenants in East Palo Alto’s University Circle office complex, is leaving the city by July 1.
The cloud computing company is consolidating its University Circle office with other campuses in the Bay Area, according to Jeff Gronning, the chief investment officer of Columbia Property Trust, a real estate investment firm and majority owner of the property on University Circle. Gronning made the announcement in an investors call on Feb. 18.
Amazon Web Services, which is a subsidiary of Amazon.com Inc., has several locations in the region spanning from Sunnyvale to San Francisco.
The company’s departure from the complex that also houses the Four Seasons Hotel Silicon Valley will leave vacant a 90,000-square-foot space, which according to the Silicon Valley Business Journal makes the company the second-largest tenant in the development next to the law firm, DLA Piper. The law firm renewed the lease for its 119,000-square-foot office in 2017, the Business Journal reported.
Jim Fleming, chief financial officer of Columbia Property Trust, added during the investors call that his firm believes it will lease the space again “at the same or better rates,” but it will take some time to do so due to the COVID-19 pandemic.
“Given COVID, we’re anticipating that this will take a few months, which will temporarily reduce cash flow in 2021,” he said.
Amazon.com isn’t making a full exit out of East Palo Alto. The company will still operate at 2100 University Ave., a 200,000-square-foot office development by The Sobrato Organization.
“Amazon is maintaining its lease at 2100 University Ave. and will maintain a workforce of more than 1,000 corporate and tech employees in East Palo Alto, which includes (Amazon Web Services) employees,” Zachary Goldsztejn, Amazon Spokesperson, wrote in an email.
Amazon’s presence in East Palo Alto has long been under the eyes of careful scrutiny from East Palo Alto residents and leaders. For some, the tech behemoth’s entrance rang a death knell for the city’s housing affordability, as many residents are low-income and the city’s poverty rate sits at 13.5%.
But for others, especially city leaders looking to further develop East Palo Alto, the Amazon tenancy was a beacon, exemplifying that the city has the ability to compete with its wealthier neighbors such as Mountain View and Palo Alto in attracting businesses and, as a result, a healthy tax revenue.
The pandemic, however, poses a unique challenge for office development. With a large question mark still hanging over when companies will ask its employees to return to the office, along with the realization that employees can most likely do a mix of in-person and remote work, some East Palo Alto leaders are looking for developers that may have a different way to use the space and land available in mind.
“We are watching this closely but this is not unexpected to me,” East Palo Alto City Council member Regina Wallace-Jones commented on a Facebook post that shared the news. “It is why I have asked all developers to have a plan to flip their spaces to something else in the event that demand for corporate office space declines.”
During its tenancy, Amazon Web Services paid well below market-rate rent, Columbia Property Trust CEO Nelson Mills said during the call. Based on the numbers Gronning disclosed in the call, the Business Journal calculated that Amazon Web Services was paying about $6.58 a square foot a month, not including “utilities, property expenses and building services.”
This headline really needs to be changed to represent the reality described in the remainder of the article. Amazon Web Services is not leaving East Palo Alto. They are leaving one building and keeping another building.
Clickbait title.
Wow, the photo of the complex is way out of date. Doesn’t even include the Four Seasons, a tenant mentioned in the article.
The Poster above is right.
That is an OLD Photo?
East Palo Alto continues to Stay alive with Moving and Shaking the Rumor Mill.
All of this could have been avoided, if The City had not depended on the novice in the Planning Dept. and others that had NO real knowledge of Real Estate. Back in that era (pre-circle) there were 1,000’s of commercial Units on the Market. Just like now. You can say that They’ve come Full circle. The one thing that The Council should keep in mind is, Developers ONLY Eat if they keep building. They have no care about any other matter and that They have to be conscious of Their Investors. Right now, its a Tenants Market. Those High Lease amounts are affecting the remainder of EPA. Even $3.00 is too much in asking right now. Why Lease here, when you can (choose) among everything that is available? In fluid areas? Otherwise Office Space will be left lingering over EPA way after the Pandemic. The Developers have built in a cushion for that. EPA did not.
The Elephant in the room is, of course the Small Businesses that were not written into the Loop! Cut out of the loop totally. Not even a second thought. Why have 50 Small tiny entity’s to look up after. when you can have the same results with ONE HUGE one all the time? One voice.
With the Aid of ALL the City Councils. It should not of been that way. But Big Business aka: Developers get their way, if you keep Using “Hunches, Gut Feelings” and Lousy help, in keeping you informed.
@ Palo Alto Online Editorial Board Why did you all allow this article to be published? Misinformation, click bait title, outdated photos…. Lloyd Lee just because you covered our elections you think you can continue writing about our town in this way? East Palo Alto truly needs a local newspaper that is in it to actually educate our community. And not in it for click bait articles like these. Tired of people not from our community continuing to taint our town in a negative way SMH
EPA Youth – well said. Why are people who do not live in your community making comments about it? We ask that question in PA all of the time. It is amazing that commentators are into every other cities business but not providing what their city is doing relative to the issue at hand.
EPA is getting a lot of attention because it is going through many changes now. Bay Road is being reconstructed with new buildings. New neighborhoods. Looking good.
The article does not mentioned why Amazon is leaving. Could it be that EPA passed the “Commercial Office Space Parcel Tax for Affordable Housing and Job Opportunities?”
Amazon has a huge presence in the Moffatt area off Enterprise Way next to the airfield. These are office buildings – not ware houses. Maybe they are consolidating all of the business activity in one area because they are going to build some warehouses in the Alviso area. Cheaper rates.