NEW YORK (AP) – Amazon is pausing construction of its second headquarters in Virginia following the biggest round of layoffs 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.
He 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 USD3 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 layoffs 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 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 USD22,000 for each new Amazon job on the condition that the average worker salary for those new jobs is USD150,000, annually. Those incentives were about USD550 million for 25,000 projected jobs.
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 USD23 million, is dependent on how many square feet of office space Amazon occupies in the county.
Spokeswoman for the Virginia Economic Development Partnership Suzanne Clark said state officials are not concerned about Amazon filling its commitments.
The total of 8,000 workers now employed at the new headquarters is already running about 3,000 ahead of what was expected at this point, she said.
“No incentive money has been paid out yet to Amazon,” she added. The company is scheduled to submit its first application for payment on April 1, which will be based on the job creation from 2019 through 2022. Amazon would then receive its first grant payment on or after July 1, 2026. In a statement, Democratic United States Representative Don Beyer, who represents the district, called on the company to “promptly update leaders and stakeholders about any new major changes in this project, which remains very important to the capital region”.
