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Amazon pauses construction on second HQ

Amazon is pausing construction of its second headquarters in Virginia following the biggest round of lay-offs in the company’s history and its shifting plans around remote work.

The Seattle-based company is delaying the beginning of construction of PenPlace, the second phase of its headquarters development in northern Virginia, Amazon’s real estate chief John Schoettler said in a statement. He said the company has already hired more than 8,000 employees and will welcome them to the Met Park campus, the first phase of development, when it opens this June.

“We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees, and since Met Park will have space to accommodate more than 14,000 employees, we’ve decided to shift the groundbreaking of PenPlace (the second phase of HQ2) out a bit,” Schoettler said.

Schoettler also emphasised the company remains “committed to Arlington” and the local region, which Amazon picked – along with New York City – to be the site of its new headquarters, known as HQ2, several years ago. More than 230 municipalities had initially competed to house the projects. New York won the competition by promising nearly US$3 billion in tax breaks and grants, among other benefits, but opposition from local politicians, labour leaders and progressive activists led Amazon to scrap its plans there.

In February 2021, Amazon said it would build an eye-catching, 350-foot Helix tower to anchor the second phase of its redevelopment plans in Arlington. The new office towers were expected to welcome more than 25,000 workers when complete. Amazon spokesperson Zach Goldsztejn said those plans haven’t changed and the construction pause is not a result – or indicative of – the company’s latest job cuts, which affected 18,000 corporate employees.

The lay-offs were part of a broader cost-cutting move to trim down Amazon’s growing workforce amid more sluggish sales and fears of a potential recession. Meta, Salesforce and other tech companies — many of which had gone on hiring binges in the past few years — have also been doing the same.

Amid the job cuts, Amazon has urged its employees to come back to the office. Last month, Amazon CEO Andy Jassy said the company would require corporate employees to return to the office at least three days a week, a shift from the prior policy that allowed leaders to make the call on how their teams worked. The change, which will be effective on May 1, has ignited some pushback from employees who say they prefer to work remotely.

Goldsztejn said the company is expecting to move forward with what he called pre-construction work on the construction in Virginia later this year, including applying for permits. He said final timing for the second phase of the project is still being determined.

When Virginia won the competition to land HQ2, it did so less with direct incentives, and more with promises to invest in the regional workforce, particularly a graduate campus of Virginia Tech that is currently under construction just a couple of miles from Amazon’s under-construction campus in Crystal City.

Still, there were significant direct incentives. The state promised US$22,000 for each new Amazon job on the condition that the average worker salary for those new jobs is US$150,000, annually. But those incentives — about US$550 million for 25,000 projected jobs — are not supposed to be paid out until 2024 at the earliest. Goldsztejn, the Amazon spokesperson, said the company “has not received any incentives to date related to the construction of HQ2 and the 8,000 jobs that we’ve created in Arlington since 2018.”

Arlington County also promised Amazon a cut of its hotel-tax revenue on the theory that hotel occupancies would increase significantly once Amazon builds out its campus. That incentive, projected initially at about US$23 million, is dependent on how many square feet of office space Amazon occupies in the county.

The county said in a statement it “values the ongoing partnership” it has with Amazon throughout the creation of the second headquarters, which it noted has always been a multiyear project.

“We’re confident Amazon remains committed to the second phase of the project – PenPlace – and its benefits to the community,” it said.

Amazon had previously said it planned to complete the project by 2025.


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