Amazon suspends construction of HQ2 in Arlington


Amazon will suspend construction on the second headquarters it is building in Arlington, the company confirmed Friday, a major setback for the e-commerce giant that several years ago promised Northern Virginia an economic boom and offices employing 25,000 workers.

The tech giant said it has hired for more than 8,000 of those functions and plans to formally open Met Park, the first phase of construction in Arlington, in June. But PenPlace would occupy a larger stage over 3 million square feet just a few blocks away, 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 create a great experience for employees,” John Schoettler, Amazon’s real estate chief, said in a statement. Because Met Park will have room for more than 14,000 employees, the company had decided to “slide out a bit” of the groundbreaking PenPlace.

Amazon will bring more than 25,000 employees to the region as it opens its new headquarters. Experts are pondering how this could affect 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 slow down in the summer of 2022. The company confirmed earlier this year that it would lay off 18,000 workers. Major tech companies including Facebook, Google and Microsoft have announced major job cuts in recent months as the pandemic boom the companies were experiencing began to slow down. In addition to layoffs, Amazon has also halted expansion of its logistics network, which the company has acknowledged has added too many warehouses and workers based on the rosy growth outlook brought on by the pandemic.

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Amazon spokeswoman Rachael Lighty said the construction stoppage had nothing to do with job cuts in Northern Virginia. The construction pause was previously reported by Bloomberg News.

Plans for the PenPlace site in the Pentagon City neighborhood include three office buildings, approximately 2.75 acres of open space, and a futuristic glass Helix that would mark the area’s skyline. Lighty said while the company continues with pre-construction activities such as permit submissions, a final timeline for the project is still being determined.

The news is a blow to Arlington’s office market, which has been battling record-high vacancy rates, as well as a major setback for Amazon’s once-aggressive commercial real estate plans in the country.

For more than a year, Amazon built tension with a beauty pageant between North American locations, soliciting bids for the best economic incentives in exchange for what was promised to be an explosion of construction and jobs. Hundreds of cities from Anchorage to Dallas bid, and the company narrowed it down to a list of finalists.

In the end, many of the cities felt the decision was a bait and switch when Amazon decided to split the investment between New York and Virginia — though the company eventually pulled out of the former after public opposition to the plan.

Amazon announced last month that employees would be required to work in the office for a minimum of three days a week, after previously giving departments more leeway to decide what works best for them. The move had pleased officials in downtown Seattle, where Amazon has its first headquarters, who hoped it would revitalize the area. The neighborhood has had limited foot traffic since the start of the pandemic.

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But the company has also indicated that it needs less office space as growth slowed and working from home became more common. The Seattle Times reported that the company is letting a lease expire on one of its downtown Seattle offices and moving about 2,000 employees into existing offices.

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

The county faces a record vacancy rate of over 22.1 percent, posing a major tax challenge for a jurisdiction that relies on commercial real estate for about half of its tax revenue.

Amazon also agreed to provide on-site space for Arlington Community High School, whose student body consists largely of working adults, and to offer limited use of the facility’s conference space to the public. It is unclear what consequences construction delays could have on that commitment.

To bring Amazon’s second headquarters to Virginia, state and local officials in 2019 approved an economic stimulus deal that would provide the company with up to $573 million in public dollars as it met hiring and occupancy goals.

But the coronavirus pandemic had already cast doubt on that plan. Amazon declined to apply for the first set of those pay-as-you-go grants from Virginia, delaying payments from the state until 2026.

Local incentives, meanwhile, are based both on Amazon occupying certain amounts of office space, and on the expected increase in local hotel stays as a result of the company’s operations. Because Arlington’s hotel tax revenues hadn’t reached pre-pandemic levels, the county has yet to pay anything since the company’s arrival three years ago.

The growth of the technology industry has slowed abruptly after a decade of rapid growth, supported by the gains many companies made during the pandemic. But the boom times ended last year, after a period of falling stock prices and slowing sales growth. Companies imposed a hiring freeze and cut some perks before laying off tens of thousands of employees.

This story is in development and will be updated.

Caroline O’Donovan contributed to this report.






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