Amazon halts construction of second headquarters in Virginia

NEW YORK (AP) — Amazon suspends construction of its second headquarters in Virginia after the 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 northern Virginia headquarters development, Amazon real estate director 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 are always evaluating space plans to make sure they fit our business needs and to create a great employee experience, and since Met Park will have space to accommodate over 14,000 employees, we have decided to move the vanguard of PenPlace (the second phase of HQ2) 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 – to be the site of its new headquarters, known as HQ2, several years ago. years. More than 230 municipalities initially competed to host the projects. New York won the contest promising nearly $3 billion in tax breaks and grants, among other benefits, but opposition from local politicians, labor leaders and progressive activists led Amazon to abandon its plans there. down.

In February 2021, Amazon announced 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 to accommodate more than 25,000 workers Once finished. Amazon spokesman Zach Goldsztejn said those plans have not changed and the pause in construction is not the result – or an indication – of the company’s latest job cuts, which affected 18,000 company employees.

The layoffs were part of a broader cost-cutting movement aimed at reducing Amazon’s growing workforce amid slower sales and fears of a potential recession. Meta, Salesforce and other tech companies — many of which had continued to hire over the past few years — also did the same.

Amid the job cuts, Amazon has urged its employees to return to the office. Last month, Amazon CEO Andy Jassy said the company would require company employees to return to the office at least three days a week, a change from previous policy that allowed leaders to call on the functioning of their teams. The change, which will take effect on May 1, has prompted some pushback from employees who say they prefer to work remotely.

Goldsztejn said the company plans to move forward with what he called pre-construction work on construction in Virginia later this year, including the permit application. He said the final schedule for the second phase of the project is still being determined.

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, especially a Virginia Tech graduate campus that is under construction. a few miles from Amazon’s under-construction campus. in Crystal City.

Yet there were significant direct incentives. The state has pledged $22,000 for each new Amazon job on the condition that the average worker salary for those new jobs is $150,000 per year. These incentives were approximately $550 million for 25,000 planned jobs.

Arlington County has also promised Amazon a reduction in hotel tax revenue on the theory that hotel occupancy rates will increase significantly once Amazon builds its campus. This incentive, originally set at around $23 million, depends on how many square feet of office space Amazon occupies in the county.

Suzanne Clark, spokeswoman for the Virginia Economic Development Partnership, said state officials have no concerns that Amazon will fulfill its commitments. The total of 8,000 workers currently employed at the new headquarters is already about 3,000 ahead of what was expected at this stage, she said.

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

In a statement, Democratic U.S. Representative Don Beyer, who represents the district, called on the company to “promptly update leaders and stakeholders on any new major changes to this project, which remains very important to the capital region.” “.

Arlington County Board Chairman Christian Dorsey told a news conference Friday that Amazon didn’t win any of the performance-based incentives and didn’t receive any funds. County. He said it’s unclear how long the delay might be, but it’s “not really disappointing” since officials there had originally expected construction to be complete by 2035. Amazon previously said that he planned to complete the project by 2025.

“Amazon is still very committed – as we understand – to certainly fulfilling all of its plans and obligations within the window that was contemplated when they made the deal to come here,” Dorsey said.

Dorsey shared that the company informed him of the break before releasing the information to the public. He said Amazon didn’t provide a reason for the delay, but it wasn’t hard to guess it was related to the county’s economic uncertainty.

“They really try to pause and think about it consciously. And make decisions that not only make sense in light of current conditions, but also predicted future conditions.


Barakat reported from Falls Church, Virginia.

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