The construction of Amazon’s Virginia second headquarters is put on hold

Following the largest round of layoffs the company has ever experienced and its shifting plans regarding remote work, Amazon is putting the construction of its second headquarters in Virginia on hold.

According to a statement released by Amazon’s real estate chief John Schoettler, the Seattle-based company is delaying the start of construction on PenPlace, the second phase of the development of its headquarters in northern Virginia. He stated that the company has already hired over 8,000 workers and will welcome them to the Met Park campus, which is the first phase of development when it opens in June.

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

He also emphasized that the company is still “committed to Arlington” and the surrounding area, which Amazon chose several years ago to be the location of its new headquarters, known as HQ2, along with New York City. In the beginning, more than 230 municipalities competed to house the projects. New York won the opposition by promising almost $3 billion in tax reductions and awards, among different advantages, however, resistance from neighborhood lawmakers, work pioneers, and moderate activists drove Amazon to scrap its arrangements there.

Amazon announced in February 2021 that it would construct a 350-foot-tall Helix tower to serve as the anchor for the second phase of its Arlington redevelopment plans. When they were finished, the brand-new office buildings were expected to welcome more than 25,000 workers. According to Amazon’s spokesperson Zach Goldsztejn, those plans have not changed, and the construction pause is neither the result of the company’s most recent job cuts, which affected 18,000 corporate employees nor is it indicative of them.

In the midst of more sluggish sales and worries about a possible recession, the layoffs were part of a larger effort to cut costs and reduce Amazon’s expanding workforce. Meta, Salesforce, and other tech companies have also been doing the same, many of which have been hiring a lot in recent years.

Amazon has urged its employees to return to work despite the layoffs. As a departure from the previous policy, which allowed leaders to decide how their teams worked, Amazon CEO Andy Jassy stated last month that the company would require corporate employees to return to the office at least three days per week. Employees who say they prefer to work remotely have voiced their opposition to the change, which takes effect on May 1.

According to Goldsztejn, the company intends to proceed with what he referred to as pre-construction work on the Virginia construction later this year, including applying for permits. He stated that the final date and time for the second phase of the project are still being worked out.

Virginia won the competition for HQ2 with promises to invest in the region’s workforce, particularly a graduate campus of Virginia Tech that is currently under construction just a few miles away from Amazon’s under-construction campus in Crystal City, rather than with direct incentives.

Nevertheless, there were substantial direct incentives. The state promised $22,000 for each new Amazon job with an annual salary of $150,000 for the average worker. These incentives were approximately $550 million for the anticipated 25,000 jobs.

In addition, Arlington County promised Amazon a cut of its hotel tax revenue, assuming that hotel occupancy would significantly rise as Amazon expanded its campus. The amount of Amazon’s office space in the county will determine the size of this incentive, which was initially estimated to be around $23 million.

The Virginia Economic Development Partnership’s Suzanne Clark stated that state officials are unconcerned about Amazon fulfilling its commitments. She stated that the total number of 8,000 employees currently employed at the new headquarters is approximately 3,000 ahead of what was anticipated at this point.

She stated that Amazon has not yet received any incentive funds. On April 1, the company will submit its first application for payment, which will be based on the creation of jobs from 2019 to 2022. On or after July 1, 2026, Amazon would then receive its first grant payment.

“Promptly update leaders and stakeholders about any new major changes in this project, which remains very important to the capital region,” said Democratic U.S. Rep. Don Beyer, who represents the district.

During a news conference on Friday, Arlington County Board Chair Christian Dorsey stated that Amazon has not received any funds from the county and has not earned any of the performance-based incentives. He stated that although the length of the delay is unknown, it is “not really disappointing” considering that officials there had originally anticipated the buildout would be completed by 2035. In the past, Amazon had stated that it intended to complete the project by 2025.

“Amazon is still very much committed — as we understand it — to certainly fulfilling all of their plans and obligations within the window that was envisioned when they struck the deal to come here,” Dorsey said.

Dorsey revealed that the business informed him of the pause before releasing the information to the public. He stated that although Amazon did not provide a reason for the delay, it was not difficult to speculate that it was connected to the county’s economic uncertainty.

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