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.
However, Schoettler highlighted that the business is still “dedicated to Arlington” and the surrounding area, which Amazon selected several years ago along with New York City as the location of its new headquarters, known as HQ2. Initially, more than 230 municipalities sought to host the projects. New York won the sweepstakes by giving roughly $3 billion in tax credits and grants, among other advantages, but Amazon abandoned its plans there due to resistance from local legislators, labour leaders, and progressive activists.
Plans for Amazon HQ2
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 had recently gone on hiring binges.
Amazon has asked its staff to return to work despite the job reduction. In a change from the previous policy, which gave leaders discretion over how their teams operated, Amazon CEO Andy Jassy said last month that the company will mandate that corporate employees go to the office 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.
HQ2 seeks to increase regional employment
The commitment to invest in the local workforce, particularly a graduate campus of Virginia Tech that is now under construction just a few miles from Amazon’s under-construction headquarters in Crystal City, helped Virginia win the competition to snag HQ2.
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. These incentives, however, which total $550 million for 25,000 anticipated jobs, are not expected to be paid out until at least 2024.
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. According to her, the 8,000 employees who are presently working in the new headquarters are already around 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.
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 stated, “Amazon is still very much dedicated to definitely executing 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 making a sincere effort to pause and consider this consciously. Moreover, make decisions that are consistent with both anticipated future situations as well as the existing situation.”