Amazon suspends construction of its 2 headquarters in Arlington


Amazon will suspend construction of the second headquarters it is building in Arlington, the company confirmed Friday, a major setback for the e-commerce giant which just a few years ago promised Virginia the North an economic boom and offices filled with 25,000 employees.

The tech giant said it has hired more than 8,000 of those positions and plans to officially open Met Park, the first phase of construction in Arlington, in June. But PenPlace, a larger phase that would occupy over 3 million square feet just 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 to create a great employee experience,” John Schoettler, Amazon’s chief real estate officer, said in a statement. Because Met Park will have space to accommodate more than 14,000 employees, the company had decided to postpone the launch of PenPlace “a little”.

Amazon will bring more than 25,000 workers to the region when it opens its new headquarters. Experts are looking at how this could impact 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 decline in the summer of 2022. The company confirmed earlier this year that it was laying off 18,000 workers from its workforce. Big tech companies, including Facebook, Google and Microsoft, have announced major job cuts in recent months as the pandemic boom businesses have been experiencing begins to slow. In addition to the layoffs, Amazon also suspended expansion of its logistics network, which the company said added too many warehouses and workers based on the positive growth outlook caused by the pandemic.

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Amazon spokeswoman Rachael Lighty said the pause in construction was not related to any job cuts in Northern Virginia. The pause in construction was reported earlier by Bloomberg News.

Plans for the PenPlace site in the Pentagon City neighborhood include three corporate office buildings, approximately 2.75 acres of open space, and a futuristic glass helix that would mark the area’s skyline. Lighty said that while the company is continuing with preconstruction activities such as permitting, a final timeline for the project is still being determined.

The news is a hit for Arlington’s office market, which is struggling with record vacancy rates, as well as a major setback to Amazon’s once-aggressive commercial real estate projects in the country.

For more than a year, Amazon has been creating suspense with a beauty contest among North American sites, soliciting bids for the best economic incentives in exchange for what was promised as a building and job boom. . Hundreds of cities from Anchorage to Dallas submitted, and the company narrowed it down to a list of finalists.

Ultimately, many cities felt the decision was bait and switch as Amazon decided to split the investment between New York and Virginia – although the company ultimately backed down after public resistance to the plan.

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

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But the company also signaled its need for less office space as its growth slowed and working from home became more common. The Seattle Times reported that the company was letting a lease for one of its offices in downtown Seattle expire and moving about 2,000 workers to existing offices.

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

The county faces a record office vacancy rate of more than 22.1%, posing a major tax challenge for a jurisdiction that depends on commercial properties for about half of its tax revenue.

Amazon had also agreed to provide on-site space to house Arlington Community High School, whose student body is largely made up of working adults, and to offer limited use of the space to the public. conference in the establishment. It is unclear what impact construction delays may have on this commitment.

To bring Amazon’s second headquarters to Virginia, state and local officials approved an economic incentives deal in 2019 that would give the company up to $573 million in public dollars to meet its hiring goals. and occupation.

But the coronavirus pandemic had already called that plan into question. Amazon declined to apply for its first set of these pay-as-you-go grants from Virginia, delaying any state payments until 2026.

Local incentives, on the other hand, rely on both Amazon occupying a certain amount of office space as well as expected increases in local hotel stays resulting from company 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.

Growth in the tech industry has slowed sharply after a decade of rapid growth, buoyed by the gains many companies have seen during the pandemic. But the boom came to an end last year, after a period of falling stock prices and slowing revenue growth. Companies instituted hiring freezes and cut some benefits before laying off tens of thousands of workers.

This story is growing and will be updated.

Caroline O’Donovan contributed to this report.

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