Amazon suspends construction of its 2 headquarters in Arlington


Amazon will suspend construction of some buildings at the second headquarters it is constructing in Arlington, the company confirmed Friday, a setback for the e-commerce giant which just a few years ago promised Northern Virginia a boom economy and multiple office towers filled with employees.

In a more than year-long contest at the end of the last decade, Amazon suspended its so-called HQ2 with tens of thousands of jobs and billions in capital investment. Hundreds of cities across North America applied, offering huge economic incentives to lure the business, and eventually Amazon gave half the price to a location just across the street from DC.

But then the pandemic came and the workers stayed home. More recently, Amazon’s business has suffered a decline due to over-expansion. Since then, he has laid off nearly 20,000 employees from the company and slowed hiring and growth at his warehouses. Amazon posted an annual loss last year and scaled back plans to expand its warehouses.

Now that’s adding delays to construction in Arlington — though area officials maintain they’ll still see the benefits of the millions in incentives they’ve promised Amazon. “I don’t believe this news jeopardizes the benefits that Arlington has sought to realize since they made the decision to locate here,” said Katie Cristol (D), a member of the county council of Arlington, in an interview.

Amazon has filled more than 8,000 of the 25,000 jobs it planned to fill in Arlington, putting it ahead of its hiring schedule, and plans in June to officially open Met Park, the first phase of construction in the count. But PenPlace, a larger project that has not yet started, will be suspended indefinitely. (Amazon founder Jeff Bezos owns The Washington Post.)

“We are always evaluating space plans to make sure they fit our business needs and to create a great employee experience,” John Schoettler, Amazon’s chief real estate officer, said in a statement. Because Met Park will have space to accommodate more than 14,000 employees, the company had decided to postpone the launch of PenPlace “a little”.

Plans for the PenPlace site, a stone’s throw from the Pentagon, include more than 3 million square feet of office space spread over three buildings. Cristol, the county legislator, said she believes the company is committed to building at least one office tower, as well as its futuristic glass Helix project and 2.5 acres of open space.

But the future of two other offices on this site is unclear. Amazon spokeswoman Rachael Lighty said the company is moving forward with pre-construction activities such as permit filing, although a final timeline for the entire PenPlace project is still in the works. of determination.

Amazon will bring more than 25,000 workers to the region when it opens its new headquarters. Experts are looking at how this could impact gentrification and jobs. (Video: Hadley Green/The Washington Post, Photo: Jackie Lay/The Washington Post)

After a decade of explosive growth, Amazon’s expansion began to decline in the summer of 2022. The company confirmed earlier this year that it was laying off 18,000 workers from its workforce.

Big tech companies, including Facebook, Google and Microsoft, have announced major job cuts in recent months as the pandemic boom businesses have been experiencing begins to slow. In addition to the layoffs, Amazon also suspended expansion of its logistics network, which the company said added too many warehouses and workers based on the positive growth outlook caused by the pandemic.

Reports of lackluster earnings show Big Tech’s golden age is fading

Lighty, the Amazon spokeswoman, said the pause in construction was not related to any job cuts in Northern Virginia. The pause in construction was reported earlier by Bloomberg News.

The news is a hit for Arlington’s office market, which is struggling with record vacancy rates, as well as a major setback to Amazon’s once-aggressive commercial real estate projects in the country.

Amazon’s decision to suspend construction is “not surprising,” said John Mozena, president of the Center for Economic Accountability, a Michigan nonprofit advocacy organization.

“The reality is that companies are going to do what their leaders think is best for them under all circumstances,” he said. “And the ability of governments to influence that is pretty minimal at best.” He pointed out that Amazon had already backed out of another planned headquarters in New York after facing significant backlash from politicians and community leaders.

But Terry Clower, director of the Center for Regional Analysis at George Mason University, said the pause in construction is just a sign that Amazon is “adapting to current market conditions.”

The labor market in the construction industry is still tight and some supply chains are still constrained, he said, putting pressure on major construction projects. Amazon is stopping to see what the “new normal” of business demand will look like, he said.

Amazon announced last month that it would require workers to work from the office at least three days a week, after previously giving departments more leeway to decide what works best for them. The decision appealed to officials in downtown Seattle, where Amazon maintains its first headquarters, who hoped it could reinvigorate the area. The neighborhood has had moderate foot traffic since the start of the pandemic.

Amazon begins widespread layoffs across corporate ranks

But the company also signaled its need for less office space as its growth slowed and working from home became more common. The Seattle Times reported that the company was letting a lease for one of its offices in downtown Seattle expire and moving about 2,000 workers to existing offices.

The “mega-block” housing PenPlace is one of the largest undeveloped parcels of the DC area’s inner urban core. Arlington officials had touted Amazon’s project as a way to bring office workers back to a neighborhood long filled with empty office buildings.

The county faces a record office vacancy rate of more than 22.1%, posing a major tax challenge for a jurisdiction that depends on commercial properties for about half of its tax revenue.

Amazon had also agreed to provide on-site space to house Arlington Community High School, whose student body is largely made up of working adults, and to offer limited use of the space to the public. conference in the establishment. This facility will be included in the first corporate building that Cristol believes Amazon has ever committed to building, though it’s unclear whether construction delays will slow that commitment.

To bring Amazon’s second headquarters to Virginia, state and local officials approved an economic incentives deal in 2019 that would give the company up to $573 million in public dollars to meet its hiring goals. and occupation.

But the coronavirus pandemic had already called that plan into question. Amazon declined to apply for its first set of these pay-as-you-go grants from Virginia, delaying any state payments until 2026.

Local incentives, on the other hand, rely on both Amazon occupying a certain amount of office space as well as expected increases in local hotel stays resulting from company activity. Because Arlington’s hotel tax revenue had yet to reach pre-pandemic levels, the county has yet to pay the company anything since its arrival three years ago.

Growth in the tech industry has slowed sharply after a decade of rapid growth, buoyed by the gains many companies have seen during the pandemic. But the boom came to an end last year, after a period of falling stock prices and slowing revenue growth. Companies instituted hiring freezes and cut some benefits before laying off tens of thousands of workers.

This story is growing and will be updated.

Caroline O’Donovan contributed to this report.

Leave a Comment