22.4 C
New York
Wednesday, June 19, 2024

Amazon’s HQ2 Aimed to Show Tech Can Boost Cities. Now It’s On Pause

After a dramatic competition that pitted US cities against one another, years of contested planning, and claims of unwavering commitment despite the pandemic, Amazon now says its plan for a second headquarters, aka HQ2, is on pause. The company said today that it will delay construction of more than half of the millions of square feet of space in a campus planned for Arlington, Virginia, including a twisting tower meant to become a signature landmark for the city. 

Amazon, which is still in the process of laying off more than 18,000 corporate workers, did not set a new date for construction to resume in Arlington, across the Potomac River from Washington, DC. Arlington County board chair Christian Dorsey says the county learned “recently” of the planned pause and does not know when construction will resume.

Amazon also declined to provide any timeline for construction to resume. “Our second headquarters has always been a multiyear project, and we remain committed to Arlington, Virginia, and the greater Capital Region,” says John Schoettler, Amazon’s vice president of global real estate and facilities.

Amazon has pledged to use the project, the first phase of which already dominates the Crystal City neighborhood in which it is located, to eventually bring at least 25,000 high-paid workers to Virginia. Arlington and other cities, including Atlanta, Georgia, and Austin, Texas, competed to win the project in part to secure a tranche of elite workers and associated tax revenue. How many people or new tax dollars Amazon will bring to Arlington, and on what timeline, is now unclear.

Amazon originally planned to build its second HQ in two phases. The first featured two large structures housing about 2 million square feet of office space, and the second another three office buildings and a centerpiece tower called the Helix, a structure something like a cross between a custard swirl and the poop emoji.

HQ2's first phase, known as Metropolitan Park, will open on schedule in June of this year, Amazon says. But the company no longer has a date for construction of the larger second phase and its signature swirl, all of which was originally planned to include about 2.8 million more square feet of office space and 115,000 square feet for retail. 

Most PopularBusinessThe End of Airbnb in New York

Amanda Hoover

BusinessThis Is the True Scale of New York’s Airbnb Apocalypse

Amanda Hoover

CultureStarfield Will Be the Meme Game for Decades to Come

Will Bedingfield

GearThe 15 Best Electric Bikes for Every Kind of Ride

Adrienne So

That ratio could theoretically change. While Amazon spokesperson Zach Goldsztejn says that Amazon’s long-term commitment remains the same, the construction pause will allow the company more time to study how its space is best used. In February the company announced that it will end its flexible, entirely remote work policy and require workers to be in the office three days a week beginning May 1. The regime change will likely shift how employees use the company’s office spaces.

“It’s not incredibly surprising that Amazon is taking a pause before beginning the second phase,” Dorsey said on a briefing call today about the company’s project. “If you look at the world, there is a lot of uncertainty about what is ahead. Everyone from every sector is thinking about its long-term plans in a new light, and sadly we don’t all have all of the answers.”

Amazon had already paused construction on planned office towers in Bellevue, Washington, and Nashville, Tennessee, in 2022. Other tech companies have also slowed real estate commitments: Microsoft recently paused planned development of another headquarters in Atlanta, Georgia, and Alphabet, Meta, and others have given up leased office space. 

Office real estate markets are generally still depressed in major cities as work-from-home and hybrid work have made it difficult for companies to justify spending on commercial space. In San Francisco, for example, office vacancy rates jumped as high as 27 percent in 2022, compared to around 5 percent or lower in the years before the pandemic. 

Arlington has been battling its own vacancy problem, and the Amazon pause could worsen economic conditions for the county. Local leaders have touted Amazon as a revitalizing agent for the office-drone-dependent region.

Unlike San Francisco and many other cities, which also draw revenue from other sectors such as tourism, Arlington relies heavily on offices and office workers, in part due to its history as a home to Pentagon office buildings. Amazon’s headquarters was supposed to boost an effort to transform Arlington’s stodgy reputation, making it a more attractive place for people to not only work from, but live in and visit. 

Despite Amazon’s construction pause, Arlington’s Dorsey remains upbeat about the company’s commitments. “Amazon’s focus on returning workers to the office three days a week is incredibly important. I’m glad that Amazon is moving forward with something that’s firm and concrete, and I hope that’s a model for others,” he said, emphasizing that he’s very focused on efforts to bring workers back to the office in order to spur economic revitalization. 

Before the pandemic, the incentives Arlington offered Amazon for the second headquarters were structured based on the assumption that the Amazon project would jump-start the Arlington economy. The theory was that the more office space Amazon occupied, the more hotel tax revenues in the county would increase. But Amazon already occupies more than 1 million square feet of space in Crystal City and has hired 8,000 people for its HQ2 location—and hotel revenues haven’t gone up. Metro ridership for the area’s local stations has also failed to recover to pre-pandemic levels. 

With the pause in construction, Amazon appears to be acknowledging that its own needs might have changed. For Arlington, the delay might slow or even stall efforts to pitch the area as a trendy place to live and work. “We are concerned, but not surprised,” Eric Cassel, president of the Crystal City Civic Association, tells WIRED. “Clearly, the Helix is a major design element for the area, and we hope the delay is not too long.”

Related Articles

Latest Articles