Amazon’s HQ2 aims to show that technology can boost cities. Now it’s on hiatus

After a dramatic competition that pitted US cities against each other, years of contested planning and claims of unwavering commitment despite the pandemic, Amazon now says its plans for a second headquarters, aka HQ2, are on hold. . The company said today it will delay construction of more than half of the millions of square feet of space at a planned campus in Arlington, Va., including a twisting tower slated to become an iconic landmark of the city.

Amazon, which is still in the process of laying off more than 18,000 company employees, has not set a new date for resuming construction in Arlington, across the Potomac River from Washington, DC. Arlington County Board Chairman Christian Dorsey said the county “recently” learned of the planned pause and did not know when construction would resume.

Amazon also declined to provide a timeline for when construction will resume. “Our second headquarters has always been a multi-year project, and we remain committed to Arlington, Virginia, and the greater capital area,” said John Schoettler, Amazon’s vice president of real estate and facilities.

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Amazon has pledged to use the project, the first phase of which already dominates the Crystal City neighborhood in which it sits, to bring at least 25,000 well-paid workers to Virginia to completion. Arlington and other cities, including Atlanta, Georgia, and Austin, Texas, competed to win the project in part to secure an elite worker slice and associated tax revenue. How many people or new taxes Amazon will bring to Arlington, and when, is no longer clear.

Amazon originally planned to build its second headquarters in two phases. The first featured two large structures housing approximately 2 million square feet of office space, and the second three other office buildings and a central tower called Helix, a structure something like a cross between a cream swirl and the emoji pooh.

The first phase of HQ2, known as Metropolitan Park, will open as planned in June this year, according to Amazon. But the company no longer has a date for construction of the larger second phase and its signature whirlwind, which was originally expected to include around 2.8 million additional square feet of office space and 115,000 square feet of retail. .

This ratio could theoretically change. While Amazon spokesman Zach Goldsztejn says Amazon’s long-term commitment remains the same, pausing construction will give the company more time to study how best to use its space. In February, the company announced it would end its flexible, fully remote working policy and require workers to be in the office three days a week from May 1. The regime change will likely change how employees use company office space.

“It’s not incredibly surprising that Amazon is taking a break before starting phase two,” Dorsey said on a conference call today about the company’s project. “If you look at the world, there’s a lot of uncertainty about what lies ahead. Everyone, in every industry, is thinking about their long-term plans in a new light, and unfortunately, not all of us have all the answers.

Amazon had already suspended construction of planned office towers in Bellevue, Washington, and Nashville, Tennessee, in 2022. Other tech companies have also slowed their real estate commitments: Microsoft recently suspended planned development of another headquarters in Atlanta, Georgia, and Alphabet, Meta, and others have given up rented offices.

Office real estate markets are generally still depressed in major cities, as working from home and hybrid working have made it difficult for companies to justify their spending on commercial space. In San Francisco, for example, office vacancy rates soared to 27% in 2022, from around 5% or less in the years before the pandemic.

Arlington has been battling its own vacancy problem, and Amazon’s hiatus could worsen the county’s economic conditions. Local leaders touted Amazon as a revitalizing agent for the region dependent 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 due to its history as a home to high-rise apartment buildings. Pentagon offices. The Amazon headquarters was meant to spur efforts to transform Arlington’s poor reputation, making it a more attractive place for people to not only work, but also live and visit.

Despite Amazon’s construction pause, Arlington’s Dorsey remains optimistic about the company’s commitments. “Amazon’s emphasis on getting workers back to the office three days a week is hugely important. I’m glad Amazon is moving forward with something firm and concrete, and I hope it will be a role model for others,” he said, noting that he was very focused on efforts to get workers back into the office to spur economic revitalization.

Before the pandemic, the incentives Arlington offered Amazon for the second headquarters were structured on the assumption that the Amazon project would revive Arlington’s economy. The theory was that the more offices Amazon occupied, the more hotel tax revenue would increase in the county. But Amazon already takes up more than 1 million square feet of space in Crystal City and has hired 8,000 people for its Headquarters 2 — and hotel revenue hasn’t increased. Subway ridership for local stations in the area has also not returned to pre-pandemic levels.

With the pause in construction, Amazon seems to recognize that its own needs may have changed. For Arlington, the delay could slow or even stall efforts to portray the area as a popular place to live and work. “We are concerned, but not surprised,” Eric Cassel, president of the Crystal City Civic Association, told WIRED. “Clearly, the Helix is ​​a major design element for the region, and we hope the delay won’t be too long.”

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