When Amazon said in 2018 that it planned to build a second headquarters in Virginia, along with an associated office complex in New York, it was a symbolic moment for the growing importance of the tech industry to the US economy.
But the company’s decision made public Friday to halt that work in Virginia, some four years after Amazon pulled out of its New York expansion plans, is the latest reminder that the tech industry’s long boom it has slowed down.
It’s also another indication that the pandemic may have permanently changed office work, presenting new challenges for communities that had been counting on the growth of tech offices.
The decision to delay the high-profile construction project, which it called HQ2, came as Amazon and other big tech employers made the most significant cuts to their workforce in at least 15 years.
Companies are also struggling to figure out what to do with their offices, as their workers continue to spend at least part of their time working from home. Nearly three years after the pandemic shut down workplaces, few tech companies have required their employees to return to the office full-time.
Inside the world of big technology
“HQ2 being on hiatus is emblematic of the hiatus that technology has had across the industry,” said Jeffrey D. Shulman, a University of Washington marketing professor who has researched Amazon’s impact on his hometown of Seattle. “HQ2 is the perfect emblem of where we were and where we are, and how different they are.”
The HQ2 project has several development groups in Virginia, just over the Potomac River from Washington. The pause will affect PenPlace, the second and largest phase, which would build a mix of office towers, open space and a signature spiral glass building Amazon calls the Helix.
The first phase of construction, a nearby complex known as Met Park, contains two office towers and is scheduled to open for employees in June.
The pullback makes future investments by developers and small businesses uncertain, Shulman said. “It has a ripple effect where there is now weakened confidence in something that seemed unmissable when it was announced,” he said.
The construction delay was previously reported by Bloomberg News and confirmed Friday by Amazon real estate chief John Schoettler. “We are always evaluating space plans to make sure they fit our business needs,” he said in a statement.
After Amazon rapidly expanded to cope with the pandemic boom in online shopping and services, Andy Jassy, who took over as Amazon CEO in July 2021, has spent the past year lobbying the company to reduce costs.
Last summer, amid cutting costs and uncertainty about how hybrid work would be affected, Amazon stop building multiple towers in Bellevue, Washington, near its Seattle headquarters. It planned to have space for 25,000 employees in the new offices.
Then, in November, Amazon began plans to lay off about 10,000 workers, only to expand the number of layoffs in January to 18,000.
Tech companies, hit by their biggest workforce contraction since the dot-com crash and continued remote work, have backtracked on their expansion plans, allowing them to cut real estate costs.
Google withdrew from a big project to build space for 6,000 workers near Seattle, as it announced layoffs in January, and Microsoft has delayed some work in the remodeling of the campus of its headquarters. Yelp abandoned his headquarters in San Francisco, where Salesforce has reduce leases too.
The pushback, combined with the persistence of employees working remotely, has hampered cities that relied on tech workers to frequent coffee shops, dog daycare and public transportation.
Last month Mr. Jassy wrote in a letter to employees that most corporate staff were expected to return to the office three days a week beginning May 1. It drew complaints from some Amazon workers but cheers from city officials in Seattle and Bellevue.
The slowdown in Amazon’s HQ2 is perhaps the most indicative of how quickly the tides have turned from the ambitions of just a few years ago.
In late 2018, Amazon announced that it would open secondary headquarters in Queens and Arlington, Virginia. At the time, the company said the developments would require $5 billion in construction and other investment. The company saying that would bring more than 25,000 jobs to the Arlington, Virginia region.
In early 2019, Amazon canceled its plans for a corporate campus in Long Island City in Queens after facing fierce backlash from activists, lawmakers, and union leaders.
