Amazon Pauses Construction on Second HQ in Arlington, VA

Amazon Delays Second Virginia HQ Construction due to Layoffs and Remote Work Changes. John Schoettler, Amazon's Real Estate Chief, announced the postponement of PenPlace's construction, the second phase of its northern Virginia headquarters development. The company has hired 8,000 employees already and plans to inaugurate the first phase, Met Park campus, in June.

Amazon Pauses Construction on Second HQ in Arlington, VA / Image: Google 

Amazon's Real Estate Chief, John Schoettler, has confirmed that the construction of PenPlace (the second phase of HQ2) will be delayed due to space evaluation and employee experience considerations. The company remains committed to the Arlington region despite the delay. Amazon had previously announced plans to build a 350-foot Helix tower, which would accommodate over 25,000 workers upon completion. Although the construction pause is not linked to Amazon's recent layoffs affecting over 18,000 corporate employees, the company has assured that plans for the Helix tower will continue as planned."

As a response to slower sales and the possibility of an upcoming recession, Amazon decided to reduce its workforce as part of a broader cost-cutting measure. Similarly, Meta, Salesforce, and other tech companies that had undergone hiring sprees in recent years also began to implement cost-cutting measures. Despite these job cuts, Amazon has instructed its employees to return to the office. CEO Andy Jassy announced last month that corporate employees would be required to work at least three days a week at the office, a change from the previous policy that left it to leaders' discretion. However, some employees have pushed back against this change, citing a preference for remote work."

According to Goldsztejn, the company plans to proceed with pre-construction work, which includes permit applications, for the Virginia project later this year. The exact timeline for the second phase of the project is yet to be confirmed.

HQ2 aims to boost regional workforce

Virginia emerged as the winner of the HQ2 competition by pledging to invest in the regional workforce, primarily through the development of a Virginia Tech graduate campus located just a few miles away from Amazon's campus in Crystal City. Unlike other competing locations, Virginia relied more on indirect incentives than direct incentives to secure the HQ2 project.

Despite promises to invest in the regional workforce, Virginia also provided significant direct incentives to attract Amazon's HQ2. The state pledged $22,000 per new Amazon job, with the condition that the average worker salary for those jobs is $150,000 per year. However, these incentives, totaling around $550 million for 25,000 projected jobs, won't be paid out until 2024 at the earliest. Additionally, Arlington County promised Amazon a share of its hotel-tax revenue based on the theory that hotel occupancies would increase substantially after Amazon builds out its campus. This incentive, originally estimated at about $23 million, is tied to the amount of office space Amazon occupies in the county.

Spokeswoman for the Virginia Economic Development Partnership, Suzanne Clark, stated that state officials have no concerns about Amazon fulfilling its commitments. According to Clark, the new headquarters currently employs 8,000 workers, exceeding the expected number by 3,000 at this point. She added that no incentive money has been paid out to Amazon yet. The company will submit its first payment application on April 1, which will be based on job creation from 2019 to 2022. Amazon will receive its first grant payment on or after July 1, 2026.

According to County Board Chair Christian Dorsey, Amazon remains committed to fulfilling its obligations despite the recent pause in the construction of its HQ2 project. Dorsey stated that Amazon informed him of the delay ahead of its public announcement, but did not provide a reason for the pause. However, it is believed that the pause may be linked to economic uncertainty in the county. Despite the delay, Dorsey expressed confidence that Amazon will still meet its obligations as per the original agreement.

"They are taking a deliberate pause to carefully consider their options and make decisions that are not only sensible given current conditions but also anticipated future conditions."