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Amazon Delaying Construction on PenPlace, Its Second HQ in Arlington, Va.

Mon March 13, 2023 - Northeast Edition #7
The Associated Press

In February 2021, the company said it would build an eye-catching, 350-ft.-tall Helix tower to anchor the second phase of its redevelopment plans in Arlington. (Rendering courtesy of Amazon)
In February 2021, the company said it would build an eye-catching, 350-ft.-tall Helix tower to anchor the second phase of its redevelopment plans in Arlington. (Rendering courtesy of Amazon)

Amazon announced in early March that it was pausing construction work on its second headquarters in Northern 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 Arlington, Va., Amazon's real estate chief John Schoettler said in a statement. He added that the company has already hired more than 8,000 employees and will welcome them to the nearby Metropolitan Park campus, the first phase of the 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 emphasized that the company remains "committed to Arlington" and the East Coast, 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 $3 billion in tax breaks and grants, among other benefits, but opposition from a variety of groups led Amazon to scrap its plans there.

In February 2021, the company said it would build an eye-catching, 350-ft.-tall 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 have not 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.

Amazon CEO Andy Jassy recently 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 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 pre-construction work at the Arlington site later this year, including applying for permits. He noted that the final timing for the second phase of the project is still being determined.

State Not Yet Worried About Amazon's Decision

In its March 3 report, the Associated Press noted that 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, according to the AP. The state promised $22,000 for each new Amazon job on the condition that the average annual worker salary for those new jobs is $150,000. Those incentives were about $550 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 $23 million, is dependent on how many square feet of office space Amazon occupies in the county.

Suzanne Clark, a spokesperson of the Virginia Economic Development Partnership, told the AP that state officials are not concerned about Amazon fulfilling 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.

She added that no incentive money has been paid out to Amazon.

In a statement, Democratic U.S. Rep. Don Beyer, who represents Arlington's 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."

Arlington County Board Chair Christian Dorsey said it is unclear how long the delay might be but called the news "not really disappointing" since officials there had initially projected the buildout to be completed by 2035. Amazon had previously said it planned to complete the project by 2025.

"Amazon is still very much committed — as we understand it — to certainly fulfilling all of their plans and obligations within the window that was envisioned when they struck the deal to come here," he explained to the AP.

Dorsey shared that Amazon gave him advance news of the pause in construction before releasing the information to the public. He said the company did not provide a reason for the delay, but it was not too difficult to guess that it was tied to economic uncertainty.

"They are really trying to take a pause and think about this consciously," he noted, "and make decisions that not only make sense in light of current conditions but expected future conditions."

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