Amazon suspends construction of HQ2 in Northern Virginia

Amazon is postponing the second phase of its HQ2 mega project in Northern Virginia, the company announced Friday.

HQ2 is expected to eventually bring 25,000 new Amazon employees to Arlington, Virginia, in an area near the Pentagon. The first phase of the project, called Met Park, is scheduled to open this summer. Amazon has hired 8,000 new employees for the facility, which will be 2.1 million square feet, a company spokesperson said.

Now the retail giant said it will delay the start of construction on PenPlace, the second phase of its headquarters.

“We are always evaluating space plans to make sure they fit our business needs and create a great employee experience, and since Met Park will have space for over 14,000 employees, we decided to introduce the groundbreaking PenPlace (the second phase of HQ2) a little bit,” John Schoettler, vice president for World Wide Real Estate and Facilities, said in a statement to CBS News.

The announcement comes after the Seattle-based company announced the largest corporate layoffs in its history, cutting 18,000 jobs. early this year. It also scrapped money-losing projects like the Alexa voice assistant team. Amazon joins other tech companies scaling back costs after booming during the pandemicincluding Alphabet, Microsoft and Meta.

The company said the construction pause is unrelated to the layoffs and plans to eventually house 25,000 workers at the site have not changed.

The company “stay[s] committed to Arlington, Virginia, and the greater Capital Region — which includes investing in affordable housing, funding computer science education in schools across the region, and supporting dozens of local nonprofits,” Schoettler said.

“I Told You So”

Amazon started the project in 2018 after inviting cities to a nationwide bidding war for the chance to host the company’s second campus. It chose Northern Virginia and New York City, but dropped his plans for New York after local elected officials and labor leaders objected to the nearly $3 billion in taxpayer subsidies, the company was on the verge of falling under the deal.

Some took the news of the Northern Virginia break as an opportunity to say, “I told you so.”

“Maybe a multi-billion dollar grant to the largest company in the world to build an office was a really bad idea after all,” said Senator Mike Gianaris. Twitter.

Virginia’s bid for HQ2 came with promises to invest in the regional workforce, specifically a Virginia Tech graduate campus under construction just a few miles from Amazon’s under-construction campus in Crystal City.

Yet there were important direct incentives. The state promised $22,000 for every new job at Amazon, provided the average employee salary for those new jobs is $150,000 a year. Those incentives were about $550 million for 25,000 expected jobs.

Arlington County also promised Amazon a reduction in its hotel tax revenues based on the theory that hotel occupancy would increase significantly once Amazon builds out its campus. That stimulus, initially estimated at about $23 million, depends on how many square feet of office space Amazon occupies in the county.

Suzanne Clark, a spokeswoman for the Virginia Economic Development Partnership, said state officials are not concerned about Amazon meeting its commitments. The total of 8,000 employees now working in the new headquarters is already about 3,000 ahead of what was currently expected, she said.

Clark said no stimulus money has yet been paid out to Amazon. The company is expected to file its first payment request on April 1, which will be based on job creation from 2019 through 2022. Amazon would then receive its first grant payment on or after July 1, 2026.

In a statement, Democratic U.S. Representative Don Beyer, who represents the district, called on the company to “immediately notify leaders and stakeholders of any major changes to this project, which remains very important to the Capital Region.”

Christian Dorsey, chairman of the Arlington County Board of Directors, said at a news conference Friday that Amazon has not earned any of the performance-based incentives and has not received any money from the county. He said it’s unclear how long the delay could be, but it’s “not really disappointing” as officials there had initially predicted construction would be completed by 2035. Amazon had previously said it planned to complete the project by 2025.

“Amazon is still very committed – as we understand it – to be sure to fulfill all of their plans and commitments within the time frame envisioned when they closed the deal to get here,” Dorsey said.

Dorsey shared that the company notified him of the break before releasing the information to the public. He said Amazon gave no reason for the delay, but it wasn’t hard to guess it was related to the economic uncertainty in the province.

“They’re really trying to take a break and think about this consciously. And make decisions that make sense not only in light of the current circumstances, but also in the expected future circumstances.”

CBS News’ Irina Ivanova contributed to the reporting.






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