After a dramatic competition pitting U.S. cities head-to-head, years of contentious planning and claims of unwavering commitment in the face of the pandemic, Amazon now says its plan for a second headquarters, known as HQ2, is on hold. The company said today it will delay construction of more than half of the millions of square feet of space on a planned campus for Arlington, Virginia, including a revolving tower that is to become a signature landmark for the city.
Amazon, which is still in the process of laying off more than 18,000 employees, has not set a new date for construction to resume in Arlington, across the Potomac River from Washington, DC. Arlington County board chairman Christian Dorsey says the county learned of the planned pause “recently” and does not know when construction will resume.
Amazon also declined to give a timeline for construction to resume. “Our second headquarters has always been a multi-year project and we remain committed to Arlington, Virginia and the greater Capital Region,” said John Schoettler, Amazon’s vice president of global real estate and facilities.
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Amazon has committed to using the project, the first phase of which already dominates the Crystal City neighborhood in which it is located, to eventually bring at least 25,000 high-paid workers to Virginia. Arlington and other cities, including Atlanta, Georgia, and Austin, Texas, competed for the project, in part to secure a tranche of elite workers and associated tax revenue. How many people or new tax dollars Amazon will bring to Arlington, and on what timeline, is now unclear.
Amazon originally planned to build its second headquarters in two phases. The first contained two large buildings with approximately 2 million square feet of office space, and the second contained an additional three office buildings and a central tower called the Helix, a structure that resembles a cross between a custard swirl and the poop emoji.
The first phase of HQ2, known as Metropolitan Park, is scheduled to open in June this year, Amazon says. But the company has no date for construction of the larger second phase and signature swirl, which was originally planned to include about 2.8 million square feet of additional office space and 115,000 square feet for retail.
That ratio could theoretically change. While Amazon spokesperson Zach Goldsztejn says Amazon’s long-term commitment remains the same, the construction break will give the company more time to study how best to use the space. In February, the company announced it will end its flexible, fully remote working policy and require employees to be in the office three days a week starting May 1. The regime change is likely to change the way employees use the company’s office spaces.
“It’s not incredibly surprising that Amazon is taking a hiatus before moving into phase two,” Dorsey said today during a briefing call about the company’s project. “When you look at the world, there is a lot of uncertainty about what lies ahead. Everyone from every industry is thinking about their long-term plans in a new light, and unfortunately we don’t all have all the answers.”
Amazon had already paused construction of planned office towers in Bellevue, Washington and Nashville, Tennessee in 2022. Other tech companies have also delayed real estate commitments: Microsoft recently paused planned development of another headquarters in Atlanta, Georgia, and Alphabet, Meta. and others have given up rented office space.
Office real estate markets are still generally depressed in major cities as home working and hybrid work have made it difficult for companies to justify spending on commercial space. In San Francisco, for example, office vacancy rates rose as much as 27 percent in 2022, compared to about 5 percent or lower in the years before the pandemic.
Arlington has its own vacancy problem and the Amazon pause could worsen economic conditions for the county. Local leaders have touted Amazon as a revitalizing agent for the region that relies on office drones.
Unlike San Francisco and many other cities, which also derive revenue from other industries such as tourism, Arlington relies heavily on offices and office workers, in part because of its history as home to Pentagon office buildings. Amazon’s headquarters was supposed to boost efforts to transform Arlington’s bad reputation, making it a more attractive place for people not only to work from, but also to live in and visit.
Despite Amazon’s pause in construction, Dorsey in Arlington remains optimistic about the company’s commitments. “Amazon’s focus on getting employees back to the office three days a week is incredibly important. I’m glad Amazon is moving forward with something solid and concrete, and I hope this is a model for others,” he said, emphasizing that he is very focused on efforts to bring workers back to the office to drive economic revitalization. to stimulate.
Before the pandemic, the incentives Arlington offered Amazon for the second headquarters were structured on the premise that the Amazon project would jump-start Arlington’s economy. The theory was that the more office space Amazon occupies, the more hotel tax revenues would rise in the province. But Amazon already has more than 1 million square feet of space in Crystal City and has hired 8,000 people for its HQ2 location — and hotel revenue hasn’t increased. Metro passenger numbers for the area’s local stations have also failed to recover to pre-pandemic levels.
With the pause in construction, Amazon seems to recognize that its own needs may have changed. For Arlington, the slowdown could delay or even delay efforts to establish the area as a trendy place to live and work. “We are concerned, but not surprised,” Eric Cassel, president of the Crystal City Civic Association, tells WIRED. “It is clear that the Helix is an important design element for the area and we hope the delay is not too long.”
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