Amazon halts construction of second headquarters in Virginia

NEW YORK (AP) – Amazon is halting construction of its second headquarters in Virginia after its largest round of layoffs in the company’s history and its changing plans around remote work.

The Seattle-based company is delaying the start of construction on PenPlace, the second phase of its headquarters development in Northern Virginia, Amazon chief real estate officer John Schoettler said in a statement. He said the company has already hired more than 8,000 employees and will welcome them to the Met Park campus, the first phase of development, when it opens in June.

“We’re always evaluating space plans to ensure they fit our business needs and to create a great employee experience, and since Met Park will accommodate more than 14,000 employees, we’ve decided to change the groundbreaking PenPlace (the second phase of HQ2) out a bit,” Schoettler said.

He also stressed that the company remains “committed to Arlington” and the local region, which Amazon chose – along with New York City – to be the site of its new headquarters, known as HQ2, several years ago. More than 230 municipalities had initially competed to host the projects. New York won the competition by promising nearly $3 billion in tax breaks and grants, among other benefits, but opposition from local politicians, labor leaders and progressive activists prompted Amazon to shelve its plans there.

In February 2021, Amazon said it would build an eye-catching, 350-foot Helix tower to anchor the second phase of its redevelopment plans in Arlington. The new office towers were expected to accommodate more than 25,000 workers when finished. Amazon spokesman Zach Goldsztejn said those plans have not changed and that the construction pause is not a result of — or an indication of — the company’s latest layoffs, which affected 18,000 corporate employees.

The layoffs were part of a broader cost-cutting drive to trim Amazon’s growing workforce amid slower sales and fear of a potential recession. Meta, Salesforce and other tech companies – many of which had gone on hiring binges in recent years – have also done the same.

Amid the job cuts, Amazon has encouraged its employees to return to the office. Last month, Amazon CEO Andy Jassy said the company would require corporate employees to return to the office at least three days a week, a shift from previous policies that allowed managers to call how their teams worked. The change, which takes effect on May 1, has led to some pushback from employees who say they prefer to work remotely.

Goldsztejn said the company expects to move forward with what he called pre-construction work on the Virginia build later this year, including applying for permits. He said the final timing of the second phase of the project is still being decided.

When Virginia won the competition to land HQ2, it did so less with direct incentives and more with promises to invest in the regional workforce, particularly a graduate campus at Virginia Tech under construction just a few miles from Amazon’s under-construction campus in Crystal City.

Nevertheless, there were significant direct incentives. The state promised $22,000 for each new Amazon job on the condition that the average wage for the new jobs is $150,000 annually. Those incentives were about $550 million for an estimated 25,000 jobs.

Arlington County also promised Amazon a cut in hotel tax revenue on the theory that hotel occupancy will increase significantly as Amazon builds out the campus. This incentive, originally estimated at around $23 million, depends on how many square meters of office space Amazon occupies in the county.

Suzanne Clark, a spokeswoman for the Virginia Economic Development Partnership, said state officials are not concerned about Amazon meeting its obligations. The total 8,000 workers now employed at the new headquarters are already running about 3,000 ahead of what was expected at this point, she said.

She said no incentive money has been paid to Amazon yet. The company is scheduled to submit its first payment application on April 1, which will be based on job creation from 2019 through 2022. Amazon will then receive its first grant payment on or after July 1, 2026.

In a statement, Democratic U.S. Rep. Don Beyer, who represents the district, urged the company to “immediately update managers and stakeholders on any new major changes to this project, which remains critically important to the Capital Region.”

Arlington County Board Chairman Christian Dorsey said during a news briefing Friday that Amazon has not earned any of the performance-based incentives, and it has not received any funds from the county. He said it’s unclear how long the delay might be, but it’s “not really disappointing” since officials there had initially estimated the development would be completed by 2035. Amazon had previously said it planned to complete the project by 2025.

“Amazon remains very committed — as we understand it — to absolutely fulfilling all of their plans and commitments within the window that was envisioned when they entered into the agreement to come here,” Dorsey said.

Dorsey shared the company notified him of the break ahead of releasing the information to the public. He said Amazon didn’t give a reason for the delay, but it wasn’t a stretch to guess it was related to the county’s economic uncertainty.

“They’re really trying to pause and consciously think about this. And make decisions that not only make sense in light of current conditions, but expected future conditions.”


Barakat reported from Falls Church, Virginia.

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