Amazon suspends HQ2 construction in Northern Virginia

Amazon is postponing the second phase of its HQ2 megaproject in Northern Virginia, the company said on Friday.

Headquarters 2 is predicted to eventually bring 25,000 new Amazon employees to Arlington, Virginia, near the Pentagon. As planned, the opening of the first phase of the project, called Met Park, is scheduled for this summer. Amazon has hired 8,000 new employees for the 2.1 million-square-foot facility, a company spokesperson said.

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

“We are always evaluating space plans to ensure they meet the needs of our business and create a great employee experience, and as Met Park will have space to accommodate over 14,000 employees, we have decided to move the groundbreaking work of PenPlace (HQ2 Phase 2) a bit dragged on,” World Wide vice president of real estate and facilities John Schöttler 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 earlier this year. He also cut unprofitable projects such as Alexa voice assistant team. Amazon joins other tech companies cutting spending after booming during the pandemic, including Alphabet, Microsoft and Meta.

The company said the pause in construction was not due to layoffs and that plans to take 25,000 workers to the site have not changed.

The company “remains[s] commitment to Arlington, Virginia, and the greater metropolitan area, including investing in affordable housing, funding for computer science education in schools across the region, and supporting dozens of local nonprofits,” Schottler said.

“I told you”

Amazon launched the project in 2018 after inviting cities to a nationwide war for the right to host the company’s second campus. He chose Northern Virginia and New York, but abandoned his New York plans after local elected officials and labor leaders objected to the nearly $3 billion in taxpayer subsidies the company was to receive as part of the deal.

Some took the news of the Northern Virginia pause as a chance to say, “I told you so.”

“Maybe the multibillion-dollar subsidy for the largest corporation in the world to build an office was a really bad idea after all,” State Senator Mike Janaris said. Twitter.

Virginia’s bid for Headquarters 2 was accompanied by pledges to invest in a regional workforce, specifically the Virginia Tech alumni campus, which is being built just a couple of miles from Amazon’s ongoing Crystal City campus.

However, there were significant direct incentives. The state has pledged $22,000 for each new job at Amazon, assuming the average wage for a worker in those new jobs is $150,000 per year. These incentives amounted to about $550 million for 25,000 scheduled jobs.

Arlington County also promised Amazon to cut its hotel tax revenue on the grounds that hotel occupancy will increase significantly once Amazon builds its campus. This incentive, originally planned at around $23 million, depends on how many square feet of office space Amazon has in the county.

Suzanne Clark, a spokeswoman for the Virginia Economic Development Partnership, said state officials were not concerned about Amazon’s performance on its obligations. The new headquarters now employs 8,000 people, 3,000 more than expected, she said.

Clarke said that Amazon’s incentive money has not yet been paid out. The company plans to file its first application for the payout on April 1, which will be based on job creation from 2019 to 2022. Amazon will then receive its first grant payment on or after July 1, 2026.

In a statement, Democratic Rep. Don Beyer, representing the county, urged the company to “immediately communicate to leaders and stakeholders any new major changes to this project, which remains very important to the metropolitan area.”

Arlington County Board Chairman Christian Dorsey said during a briefing Friday that Amazon has not received any performance-based incentives and has not received any funds from the county. He said it’s unclear how long the delay could be, but it’s “not entirely disappointing” as officials originally planned to complete construction by 2035. Amazon previously said it plans to complete the project by 2025.

“Amazon remains very committed – as far as we understand it – to unconditional fulfillment of all of their plans and commitments within the window that was envisioned when they made the deal to come here,” Dorsey said.

Dorsey shared that the company notified him of the pause until the information was released. He said Amazon didn’t give a reason for the delay, but it wasn’t hard to guess it was due to economic uncertainty in the area.

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

Irina Ivanova of CBS News provided the coverage.

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