Amazon says it’s halting construction on HQ 2 in Arlington


Amazon will halt construction of some buildings at a second headquarters being built in Arlington, the company confirmed Friday, a blow to the e-commerce giant that a few years ago promised northern Virginia an economic boom and multiple office towers filled with employees. Was.

In a sweepstakes over a year late last decade, Amazon hung its so-called HQ2 with thousands of jobs and billions in capital investment. Hundreds of cities across North America applied, offering huge economic incentives to attract the company, and eventually Amazon awarded half the prize to a site across the river from DC.

But then came the pandemic and the workers stayed at home. More recently, Amazon’s business has declined due to over-expansion. Since then, it has laid off nearly 20,000 corporate employees and slowed hiring and growth in its warehouses. Amazon reported an annual loss last year, and cut plans to expand its warehouses.

Now, it’s adding to construction delays in Arlington — though area officials say they’ll still see the benefits of the millions in incentives they promised Amazon. Arlington County Board Member Katie Kristol (D) said in an interview, “I do not believe this news jeopardizes the gains that Arlington sought to realize.”

Amazon has filled more than 8,000 of the 25,000 jobs it anticipates filling in Arlington, ahead of its hiring schedule, and is set to formally open Met Park, the first phase of construction in the county, in June. There is a plan. But Penplace, a major project that is yet to get off the ground, will be put on hold indefinitely. (Amazon founder Jeff Bezos owns The Washington Post.)

“We’re always evaluating space plans to make sure they meet our business needs and create a great experience for employees,” John Schoettler, Amazon’s head of real estate, said in a statement. Because Met Park will have space to accommodate over 14,000 people. employees, the company had decided to “fizzle out” the groundbreaking of Penplace.

Plans for the PainPlace site, located just steps from the Pentagon, include more than 3 million square feet of office space spread over three buildings. Kristol, the county legislator, said he believes the company is committed to building at least one office tower, as well as its planned futuristic glass helix and 2.5 acres of open space.

But the future of two other offices on that site is unclear. Amazon spokeswoman Rachel Lighty said the company is moving forward with pre-construction activities such as filing permits, though a final timeline for the overall PainPlace project is still being determined.

Amazon will bring more than 25,000 workers to the area as it opens its new headquarters. Experts consider how this could affect gentrification and jobs. (Video: Hadley Green/The Washington Post, Photo: Jackie Ley/The Washington Post)

After a decade of explosive growth, Amazon’s expansion is set to begin slowing in the summer of 2022. The company confirmed earlier this year that it was laying off 18,000 employees in its corporate workforce.

Big tech companies including Facebook, Google and Microsoft announced massive job cuts over the past several months due to the pandemic boom the companies began to experience. In addition to the layoffs, Amazon has also halted the expansion of its logistics network, which the company acknowledged added too many warehouses and workers, based on the rosy growth outlook caused by the pandemic.

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Lighty, an Amazon spokeswoman, said the construction halt was not related to any job cuts in northern Virginia. Bloomberg News previously reported the construction halt.

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

John Mozena, president of The Center for Economic Accountability, a nonprofit advocacy organization in Michigan, said Amazon’s move to halt construction is “stunning.”

“The reality is that businesses are going to do what their leaders feel is best for them under any given set of circumstances,” he said. “And governments have little ability to influence it.” He pointed out that Amazon had already backed out of another planned headquarters in New York City after facing significant backlash from politicians and community leaders there.

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

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

Amazon announced last month that employees would be required to work from the office at least three days per week, after previously giving departments more latitude to decide what works best for them. The decision pleased Seattle city officials, where Amazon maintained its first headquarters, who expressed hope it could revitalize the area. Foot traffic in the neighborhood has decreased since the pandemic began.

Amazon begins mass layoffs in corporate ranks

But the company has also indicated a need for less office space as its growth slows and work-from-home becomes more common. The Seattle Times reported that the company is letting a lease for one of its offices in downtown Seattle lapse and is moving about 2,000 employees into existing offices.

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

The county is facing record-high office vacancies of more than 22.1 percent, a major fiscal challenge for a jurisdiction that relies on commercial properties for nearly half of its tax revenue.

Amazon also agreed to provide space to house Arlington Community High School, whose student body consists largely of working adults, and offer limited use of conference space to the public. That facility will be included in the first corporate building that Kristol believes Amazon is still 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 incentive deal in 2019 that will give the company up to $573 million in public dollars as it meets hiring and occupancy goals.

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

Local incentives, meanwhile, are based on Amazon occupying a certain amount of office space as well as expected growth in local hotels stemming from the company’s activity. Because Arlington’s hotel tax revenue had not yet reached pre-pandemic levels, the county has yet to pay the company anything since its arrival three years ago.

The tech industry’s growth has suddenly slowed after a decade of rapid growth from the gains many companies experienced during the pandemic. But last year’s boom came to an end, after stock prices plummeted and revenue growth slowed. Companies put a halt to hiring and cut some perks before laying off thousands of employees.

This story is developing and will be updated.

Caroline O’Donovan contributed to this report.

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