Following the largest round of layoffs in the company’s history and changes to its plans on remote work, Amazon has decided to halt building of its second headquarters in Virginia.
According to a statement from Amazon’s president of real estate John Schoettler, the Seattle-based corporation is delaying the start of building on PenPlace, the second phase of its headquarters expansion in northern Virginia. When the Met Park campus, the first phase of the construction, opens in June, the corporation will have welcomed more than 8,000 new hires, he claimed.
Since Met Park will have space to accommodate more than 14,000 employees, we’ve decided to postpone the groundbreaking of PenPlace (the second phase of HQ2) a little bit, according to Schoettler. “We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees,” Schoettler said.
He also stressed that the business is still “dedicated to Arlington” and the surrounding area, which Amazon chose several years ago, along with New York City, to be the location of its new headquarters, known as HQ2. Initially, more than 230 municipalities sought to host the projects. Despite resistance from local lawmakers, labour groups, and progressive activists, New York won the sweepstakes by pledging roughly $3 billion in tax rebates and subsidies, among other incentives.
Amazon announced in February 2021 that it would construct the 350-foot Helix skyscraper to serve as the focal point of Arlington’s second phase of development. More than 25,000 employees were anticipated to work in the new office towers once they were finished. These plans haven’t changed, according to Amazon spokesperson Zach Goldsztejn, and the construction halt is not connected to or suggestive of the company’s most recent job layoffs, which affected 18,000 corporate employees.
The layoffs were a part of a larger cost-cutting initiative to reduce Amazon’s expanding headcount amid slower sales and concerns about a possible recession. The same is being done by Meta, Salesforce, and other tech firms, many of which have just gone on hiring binges.
Amazon has asked its staff to return to work despite the job reduction. Amazon CEO Andy Jassy announced last month that the business would change its previous policy, which allowed CEOs to decide how their teams worked, to one that would have corporate employees report to work at least three days per week. Employees who want to work remotely have expressed some opposition to the change, which will take effect on May 1.
According to Goldsztejn, the firm anticipates beginning what he called pre-construction work on the project in Virginia later this year, including requesting the necessary permissions. He stated that the exact timeframe for the project’s second phase is still being decided.
When Virginia defeated other states to win the bid for HQ2, it did so less with cash payments and more with commitments to invest in the local workforce, particularly at a Virginia Tech graduate campus that is being built just a few miles from Amazon’s under-construction headquarters in Crystal City.
Yet, there were considerable direct incentives. The state agreed to pay $22,000 for each new Amazon position in exchange for a $150,000 yearly average worker compensation. Incentives totaled roughly $550 million for the 25,000 jobs anticipated.
In addition, Arlington County guaranteed Amazon a portion of its hotel tax income on the grounds that hotel occupancy rates will rise sharply after Amazon expands its site. This incentive, which had a $23 million initial projection, is based on how many square feet of office space Amazon takes up in the county.
The Virginia Economic Development Partnership spokesman Suzanne Clark said state officials are not worried about Amazon keeping its obligations. She noted that the 8,000 employees who are currently working at the new headquarters are currently running roughly 3,000 ahead of schedule.
She claimed that Amazon had not yet received any incentive payments. On April 1, the company will submit its first application for payment, which will be based on the creation of jobs from 2019 through 2022. The first grant payment would then be made to Amazon on or after July 1, 2026.
Democratic district representative and U.S. Rep. Don Beyer urged the firm to “promptly advise leaders and stakeholders about any new major changes in this project, which remains vitally essential to the capital region” in a statement.
Amazon hasn’t reaped any of the performance-based incentives, according to Arlington County Board Chair Christian Dorsey, and the county hasn’t given it any money either, he claimed during a news briefing on Friday. Although the length of the delay is unknown, he claimed that it is “not particularly disappointing” given that local officials had originally anticipated that the buildout would be finished by 2035. Prior to now, Amazon had stated that it aimed to finish the project by 2025.
As far as we can tell, Dorsey added, “Amazon is still steadfastly dedicated to carrying out all of their objectives and duties within the window that was anticipated when they struck the deal to come here.
Prior to making the material public, the business informed Dorsey of the pause, he said. He claimed that although Amazon did not give an explanation for the delay, it was easy to infer that it was related to the country’s economic unpredictability.
“They are genuinely attempting to halt and consider this consciously. Also, make decisions that are reasonable in view of both anticipated future conditions and current conditions.
