BREAKING: Second phase of Amazon’s HQ2 delayed, county ‘not surprised’ but optimistic

(Updated at 3 p.m.) Amazon is putting the second phase of its second headquarters in Arlington on pause, Bloomberg and various other business news outlets are reporting.

“The construction moratorium will delay the online retailer’s full arrival at its biggest real estate project, and could create headaches for local developers, as well as construction and service workers banking on Amazon’s rapid expansion,” Bloomberg first reported.

It is a move that is not totally unexpected but yet will have significant local economic ramifications. Phase 2 of HQ2, approved by the Arlington County Board in April 2022, would have come with hundreds if not thousands of construction jobs, nearly 3 million square feet of office space, and the futuristic, nature-inspired Helix building.

That’s not to mention possible impacts on some of the development in the area spurred by Amazon’s arrival.

Amazon is still on track to complete the first HQ2 phase in Pentagon City this summer and told the Washington Business Journal that it still plans to eventually hire some 25,000 workers for its Arlington presence.

Thus far, this move is being described as a “pause” and not a cancellation. Amazon still plans to apply for permits associated with the project’s second phase, on what’s known as the PenPlace site, according to the Business Journal.

Amazon recently announced that it would be bringing most employees back to the office at least three days per week, after three years of working from home during the pandemic. Some employees, including those who work on national security-related business lines, have been working out of rented office space in Crystal City during that time.

Earlier this year, Amazon announced plans to lay off more than 18,000 employees across the company. It also paused work on office construction projects in Nashville and in the Seattle area.

Arlington County issued the following statement about Amazon’s decision today.

Arlington County values the ongoing partnership with Amazon throughout the creation of its second headquarters – HQ2 has always been a multi-year project, and it continues to be a long-term commitment to Arlington and Virginia. We’re confident Amazon remains committed to the second phase of the project — PenPlace — and its benefits to the community, including affordable housing and the exciting partnership with Arlington Public Schools for the Community High School. We remain committed to working with Amazon in the years ahead, and look forward to the opening of phase one — Met Park — later this year.

At a virtual press conference this afternoon, County Board Chair Christian Dorsey said the HQ2 delay is “not exactly surprising” and “makes sense” given economic conditions and post-pandemic work patterns.

“It really doesn’t concern me, in fact i’m quite understanding,” Dorsey said. “Every [organization], from every sector, is thinking of its long term plans in a new light.”

“We’re going to ultimately see all of the benefits that we envisioned at the beginning, it’s just going to take longer,” Dorsey said, confidently predicting that the second HQ2 phase will still get built. “There’s no indication that I have that as Amazon expands, a central piece of that won’t be HQ2 and Arlington.”

Dorsey added that the county had expected a longer process for the completion of HQ2 before Amazon started pursuing a “more aggressive” timeline.

“From the very beginning, we were looking at 2035 as the ultimate build out of HQ2,” he asserted.

Dorsey noted that to date, Amazon has not received any economic incentive payments from the county. The payments are based largely on growth in the county’s hotel tax revenue, which has only started approaching pre-pandemic levels.

Among Amazon’s promises associated with HQ2, Dorsey said there will be “no retreat” in the company fulfilling community benefits like $30 million for affordable housing. A planned new facility for Arlington Community High School in the second phase of HQ2 might be delayed, but would still be built, likely with the first building of phase 2.

“They have committed to delivering that as soon as possible,” Dorsey said.

Pressed by reporters on when Amazon might finally move forward on phase 2, Dorsey said he was not told. But given that the company will still be seeking permits for the project, “there’s some anticipation that they would move forward in the next calendar year.”

In a separate press release today, JBG Smith, a major local commercial landowner and developer that has been helping Amazon with HQ2, confirmed that a summer opening HQ’s first phase remains on track.

“Amazon’s new National Landing headquarters remains on schedule for a summer 2023 opening without interruption or delay,” the company said. “Amazon’s new offices at Met Park will accommodate up to 14,000 Amazon employees, including the 8,000 workers that Amazon has already hired – which represents a 60 percent increase in its local workforce since its previous disclosure in spring 2022.”