Amazon has put the next phase of its HQ2 construction in Arlington, Virginia, on hold, a decision that comes after the largest job cuts in the company’s history.
The second phase of new construction, known as PenPlace, was set to include four office buildings, one of which is a unique Helix-shaped building.
The delay comes amid long-term economic uncertainty and lingering questions about the future of working from offices after disruptions from the COVID-19 pandemic.
However, in a news briefing with reporters Friday afternoon, Arlington County Board Chair Christian Dorsey said the delay “doesn’t invite worry” and that he remains “bullish” about the massive project.
Meanwhile, Amazon is set to begin moving employees into the first phase of new construction for HQ2 in Arlington, known as Metropolitan Park this June. It currently has about 8,000 employees working in leased office space in Crystal City.
The announcement of the pause Friday came after Amazon announced a total of 18,000 layoffs in recent months. However, the company says the decision to put PenPlace construction on hold is not the result or indicative of any job eliminations.
In a statement to WTOP Friday morning, Amazon Vice President of Real Estate John Schoettler said: “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.”
The statement went on to say: “Our second headquarters has always been a multiyear project, and we remain committed to Arlington, Virginia, and the greater Capital Region … We appreciate the support of all our partners and neighbors, and look forward to continuing to work together in the years ahead.”
‘A lot of uncertainty’
No timeline for proceeding with construction was provided.
Dorsey, the Arlington County board chair, said the company hadn’t provided a timeline for how long the pause would last, but said the company indicated it would continue seeking permits throughout the year.
“I think that means that there is some anticipation that they would move forward in the next calendar year, but when exactly that would be, what exactly that would look like, I still think that’s a part of their discernment process,” Dorsey said.
Dorsey said he is confident that Amazon is still committed to the second phase of the project, as well as the community benefits the tech giant has already pledged, including millions in affordable housing and the partnership with Arlington Public Schools for the Community High School at the PenPlace development in Pentagon City.
On the pause in new construction, Dorsey said, “It really doesn’t concern me. In fact, I’m quite understanding. If you look at the world, there is a lot of uncertainty about what is ahead. And as we all negotiate the post-pandemic reality, everyone from every sector is thinking about its long-term plans in a new light.”
He added, “I think that we are still going to see all of the benefits that we envisioned at the beginning … It’s just going to take a little longer to realize.”
When asked if there was anything that would make him question Amazon’s commitment to Arlington, Dorsey replied, “The only scenario that I could envision that would cause me to actually have concern would be an economic catastrophe that befalls the country, the likes of which I’m not going to predict.”
‘Less than some feared’
In a statement Friday afternoon, Virginia Democratic Rep. Don Beyer said Amazon staff had assured him the company remained committed to Northern Virginia.
“While this construction pause and hiring freeze are obviously concerning, Amazon says the impact on planned infrastructure investments announced as part of the HQ2 project will be less than some feared.”
He said he would continue to monitor developments and said the company should provide prompt updates about any new major changes to the project.
Amazon has pledged at least 25,000 jobs in Northern Virginia over the next decade, as part of Virginia’s massive incentives package for Amazon choosing Northern Virginia for HQ2. The e-commerce company initially planned to split HQ2 operations between Arlington and New York City, but canceled the New York City plans after a backlash of objections from lawmakers and activists there over the size of government incentives being offered.
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 $23 million, is dependent on how many square feet of office space Amazon occupies in the county.
Dorsey said Amazon hasn’t yet earned of the incentives under the HQ2 deal, nor has the county paid any.
With the opening of the Metropolitan Park phase of the project this June, about 8,000 Amazon players will be moving into new offices.
Dorsey said it’s critical that those employees work regularly from the office to support the surrounding local economy, and he praised Amazon for plans announced last month to require corporate employees to return to the office at least three days a week.
“And I hope that this becomes sort of a model for other companies who are wrestling with the same issue,” he said.
JBG Smith is the developer for both Metropolitan Park and PenPlace. It is also the owner of the Crystal City offices Amazon is currently leasing.
The Associated Press contributed to this report.