Amazon will halt construction on HQ2 in Arlington End-shutdown


Amazon will halt construction on some buildings on the second headquarters it is building in Arlington, the company confirmed Friday, a setback for the e-commerce giant that just a few years ago promised northern Virginia an economic boom and multiple crowded office towers. of employees.

In a year-long draw late last decade, Amazon hung up its HQ2 campus with 50,000 jobs and billions of dollars. in equity investments. Hundreds of North American cities applied, offering strong incentives to attract the company, and eventually Amazon awarded half of the prize ($2.5 billion) to a site across the river from DC.

But then the pandemic came in March 2020 and kept workers at home. More recently, Amazon’s business suffered a decline due to overexpansion. Since then, it has laid off 18,000 corporate employees and reduced hiring and growth at its stores.

Now, that’s slowing construction in Arlington, though area officials say the millions of dollars they promised Amazon are still worth it. “Ultimately, we’re going to see all the benefits that we envisioned at the beginning,” Arlington County Board Chairman Christian Dorsey (D) said. “It’s just going to take longer.”

Dorsey, who noted that the project was never supposed to be complete before 2035, added that he was not surprised by Amazon’s pause. “Everyone from all walks of life is thinking about the plans in a new light”, hey saying.

Amazon has hired more than 8,000 of the 25,000 employees it planned to add in Arlington and plans to formally open Met Park, its first phase of construction in the county, in June. But PenPlace, a larger project down the street that hasn’t started yet, will be put on hold 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 head of real estate, said in a statement. Because Met Park can accommodate more than 14,000 employees, the company decided to shift the construction of PenPlace “a bit.”

Plans for the PenPlace site, a stone’s throw from the Pentagon, include more than 3 million square feet of office space spread across three 22-story buildings. Arlington County Board Member Katie Cristol (D) said she 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. .

The future of two other office buildings in that 12.5 acre project it may be less clear cut. Amazon spokeswoman Rachael Lighty said no changes have been made other than changing the early opening start at PenPlace, and that the company is moving forward with pre-construction activities, such as filing permits. The company has until April 2025 to begin construction, based on county approvals last year.

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

Amazon as a whole has been slowing its pace of growth in recent months. After a decade of explosive development, the company’s expansion began to slow down in the summer and confirmed earlier this year that it was laying off 18,000 workers from its corporate workforce.

Big tech companies including Facebook, Google and Microsoft have also announced major job cuts in recent months as the pandemic boom experienced by businesses began to subside. In addition to the layoffs, Amazon has also halted expansion of its logistics network, which the company has acknowledged added too many warehouses and workers based on optimistic growth prospects caused by the pandemic.

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Lighty, the Amazon spokeswoman, said the construction pause was not related to any job cuts. The company had projected to cover some 7,650 jobs in Arlington by the end of 2023, which means the current hiring is early. (The pause was before reported by bloomberg news.)

Still, the news is a boon for the Arlington office market, which has been struggling with record vacancy rates, as well as a major setback for Amazon’s once-aggressive commercial real estate plans in the country.

Amazon’s move to pause construction of its second headquarters “is not surprising,” said John Mozena, president of the Center for Economic Responsibility, a nonprofit advocacy organization in Michigan.

“The reality is that companies will do what their leaders think is best for them in any type of circumstance,” he said. “And the ability of governments to influence that is minimal at best.” He noted that Amazon already pulled out of another planned New York City headquarters in 2019. after facing significant backlash from politicians and community leaders there.

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

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

Rep. Don Beyer (D-Va.), who represents Arlington in Congress, said in a statement that the news was “obviously concerning,” but the impact was not as severe as some might fear.

“It is clear that Amazon is not immune to economic pressures,” he added. “The company should immediately update leaders and stakeholders on any major new changes to this project, which continues to be very important to the capital region.”

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

However, the company has also signaled its need for less office space as its slow growth and working from home became more common. The Seattle Times reported that the company is letting the lease on one of its downtown Seattle offices expire and moving about 2,000 workers into existing offices.

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

JBG Smith, the developer of the new Amazon headquarters, has said it expects Amazon to vacate 300,000 square feet it has leased from the real estate company once Met Park opens. (Lighty said in a statement that the company may retain some additional space there, pending its needs.)

The county is facing a record office vacancy of more than 22.1 percent, representing a major fiscal challenge for a jurisdiction that has traditionally relied on commercial property for about half of its tax revenue.

Amazon has also agreed to provide on-site space to house Arlington Community High School, whose student body is largely working adults, and to offer limited use of on-site conference space to the public. That facility will be included in the first corporate building, and Amazon will cover additional lease payments for the school district if necessary.

She said the company also plans to move forward with new underground parking, a bike lane and street improvements adjacent to PenPlace.

“They continue to honor their commitments to Arlington,” Cristol said. His MetPark development “will deliver on the community benefits that were negotiated and are a central part of why this investment in Arlington will be a great thing.”

To bring Amazon’s second headquarters to Virginia, state and local officials approved an economic incentives agreement in 2019 that would give the company up to $573 million in public dollars as it meets hiring and occupancy goals, or $773 million. if it exceeds them.

But the coronavirus pandemic had already thrown that plan into question. Amazon did not file paperwork for its first set of those Virginia pay-as-you-go grants, delaying any payments from the state until 2026.

Local incentives, for their part, are based both on Amazon occupying certain amounts of office space and on expected increases in local hotel stays derived from the company’s 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.

Caroline O’Donovan contributed to this report.

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