Amazon is suspending the second stage of its HQ2 megaproject in Northern Virginia, the company announced Friday.
HQ2 is expected to eventually bring 25,000 new Amazon employees to Arlington, Virginia, in an area near the Pentagon. The first phase of the project, called Met Park, should open this summer as planned. Amazon has hired 8,000 new employees for the facility, which will measure 2.1 million square feet, a company spokesperson said.
Now the retail giant has said it will delay the start of construction of PenPlace, the second phase of its headquarters.
“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) around a bit,” John Schoettler, vice president of World Wide Real Estate and Facilities, said in a statement to CBS News.
The announcement comes after the Seattle-based company announced the biggest corporate layoffs in its history, cutting 18,000 jobs. early this year. It also cut loss-making projects, such as the Alexa voice assistant team. Amazon joins other tech companies cutting costs after exploding for the pandemicincluding Alphabet, Microsoft and Meta.
The company said the construction pause was unrelated to the layoffs and plans to eventually accommodate 25,000 workers at the site had not changed.
The company “remain(s) committed to Arlington, Virginia and the Greater Capital Area – which includes investing in affordable housing, funding computer science education in area schools and support from dozens of local nonprofits,” Schoettler said.
“I told you”
Amazon launched the project in 2018 after inviting cities to a nationwide bidding war for the chance to host the company’s second campus. He chose Northern Virginia and New York, but abandoned his New York projects after local elected officials and union leaders objected to the nearly $3 billion in taxpayer subsidies, the company had to get the deal.
Some took the news of the break in Northern Virginia as a chance to say, “I told you so.”
“Maybe a multi-billion dollar grant to the biggest corporation in the world to build an office was a really bad idea after all,” State Sen. Mike Gianaris said. Twitter.
Virginia’s bid for HQ2 came with promises to invest in the regional workforce, specifically a Virginia Tech college campus that is under construction just 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.
Clark 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 had previously said it plans 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’re really trying to pause and consciously think about it. And make decisions that not only make sense in light of current conditions, but also expected future conditions.”
CBS News’ Irina Ivanova contributed reporting.