If you had a (paid for) API that sat on top of an S3 API for on-prem, that would be fantastic as well.
Kafka is great, but the whole Java ecosystem and the lack of control of what is in the topics and the stuff about co-ordinating the cluster in zookeeper is a management PITA.
I'd suggest a persistent emulator, using something like SQLite (one row per record). Even for local development, many applications need persistence. And it'd be even enough to run a single node low throughput production server which doesn't need robust durability and availability. But it still has enough overhead and limitations not to compete with your cloud offering.
What's however important is being as close as possible to your production system, behavior wise. So I'd try so share as much of the frontend code (e.g. the GRPC and REST handlers) as possible between these.