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Tag: HQ2

Virginia is for HQs

When CoStar Group was searching for its new headquarters in 2022, Central Place Tower at 1201 Wilson Blvd. in Arlington County, with its impressive accompanying bird’s-eye views, captured the company’s attention. 

Located about a quarter mile from the Potomac River, the gleaming, 391-foot-tall Class A office building features floor-to-ceiling windows across its 31 stories, reflecting the sky, all topped off by a 12,000-square-foot observation deck providing a panoramic view of the area and D.C. landmarks like the Washington Monument. The deck’s three stories of windows and a terrace looked like it would make an ideal meeting place for a company flying in clients from places like Los Angeles, London and Singapore.

Outside the 560,000-square-foot building, a 16,000-square-foot outdoor plaza provides a place to take a break or eat lunch, and across the street stands the Rosslyn Metro station, where passengers can catch a train to either of the region’s two major airports.

“What really appealed to us was the opportunity to have a significant presence up in Rosslyn on a transportation hub … and something that’s a real iconic building [where] we could gather folks coming from around the world for meetings and the like,” explains CoStar founder and CEO Andy Florance.

CoStar, a global real estate data and analytics company best known for its Apartments.com and Homes.com brands, first contacted the Virginia Economic Development Partnership about potentially relocating its corporate headquarters to Virginia from Washington, D.C., in September 2022. During CoStar’s assessment of more than 25 sites in D.C., Arlington and Fairfax County, the company narrowed in on Central Place Tower.

But the building came with a challenge for CoStar: The observation deck, then called The View of DC, came with a county easement that kept it open to the public as a tourist attraction and events space. The View of DC recorded 32,188 visits in 2023, of which about 27,000 were from non-Arlington residents.

“For us,” Florance says, “when we’re trying to bring people in from around the world and having these meetings and partner meetings and staff and client training, having a special space to gather people was important, and having public access and secure, confidential meetings would be difficult or not feasible.”

That’s when Arlington rolled up their sleeves. To address the easement question, explains Arlington Economic Development Director Ryan Touhill, his team worked with the county’s planners, attorney’s office and board “to determine, ‘Could we unwind that?’ and that way, that could give CoStar full access to this prime, trophy office building, and then [the county could] use the funding that we would get from that to reinvest in the neighborhood.”

In February, CoStar announced it would relocate its corporate headquarters to Central Place Tower, purchasing the building for a reported $339 million with plans to invest $20 million in the move. The company is formulating its renovation plans for the building, including lobby and security improvements. 

Some CoStar employees are already working at Central Place Tower, and the company plans to have “a significant percentage of [its] team in the Washington metropolitan area” based there by May 2025, Florance says, with all corporate headquarters staff moving to the building by the end of 2025.

CoStar reached a deal to obtain sole use of the observation deck, paying Arlington County $13.95 million, funding the county manager proposed to be used toward the planned redevelopment of the nearby 3-acre Gateway Park, home to the annual Rosslyn Jazz Festival.

In July, the Arlington County Board approved a site plan amendment and a zoning ordinance amendment allowing CoStar private use of the observation deck and allocated the funds for the park’s redevelopment.

CoStar CEO Andy Florance, pictured at the construction site for the company’s Richmond campus expansion, cites Virginia’s strengths in higher education as well as proximity to major global airports as factors that convinced him to move his company’s headquarters from Washington, D.C., to Arlington. Photo courtesy CoStar Group

“This actually helped accelerate the redevelopment of that park space by nearly a decade, and so now we’ll have a truly world-class amenity in the heart of Rosslyn that will benefit those folks that come to work there every day,” Touhill says. “It’ll benefit the residents and any visitors that we bring to the park.”

Arlington’s negotiations with CoStar to reach an agreement on the observation deck is one example of the flexibility Virginia state and local officials demonstrate when attracting and retaining large economic development projects, including multiple major corporate headquarters relocations.

Lay of the land

Twenty-four Fortune 500 companies are headquartered in Virginia, not counting Amazon.com, which officially opened its East Coast headquarters, HQ2, in Arlington’s National Landing area in June 2023. Additionally, since 2020, huge companies like ASGN, Boeing, RTX and CoStar have announced headquarters moves to Virginia.

Winning Amazon’s HQ2 in 2018 was a coup for Virginia, which triumphed over nearly 240 competing bids from other cities and states.

HQ2 was “a real catalyst in some ways,” says VEDP President and CEO Jason El Koubi. “I think it sent a signal to the rest of the world that Virginia is America’s East Coast tech hub, that Virginia is sort of America’s corporate hometown, a place where you have a real density of corporate headquarters that are thriving.”

Along with state and local officials’ willingness to negotiate, Virginia has attracted corporations like Amazon because of its business-friendly environment, educated workforce, location and track record.

Although the state’s recent headquarters wins have garnered big headlines, it’s not a new phenomenon. In past decades, Virginia has been the corporate base for companies like ExxonMobil, AOL, Circuit City and A.H. Robins Co. And it’s currently home to international defense contracting giants like Northrop Grumman and General Dynamics.

The commonwealth historically has had success attracting major headquarters, says Todd Haymore, managing director of Hunton Andrew Kurth’s global economic development, commerce and government relations consultancy and a former Virginia secretary of commerce and trade.

“Look at the broad scope of time,” Haymore says. “It’s not just happening in the last couple of years; it’s happened across decades, and I think it’s fostered by the fact that we are recognized as that pro-business, pro-growth, pro-job creation state.”

For instance, Virginia is a right-to-work state, meaning employees cannot be required to join a union as a condition of employment.

Factors such as these, along with the state’s strong foundation in higher education and workforce training, have contributed to Virginia’s record six wins as CNBC’s Top State for Business in the cable business news network’s annual rankings for 2024, 2021, 2019, 2011, 2009 and 2007. 

Also aiding the state’s business-friendly reputation is its stable regulatory environment.

“Companies generally look at Virginia and say, ‘OK, doesn’t matter who’s in the governor’s mansion, doesn’t matter who’s controlling the General Assembly, it’s still going to be pro-business.’ That means a lot,” Haymore says.

CoStar worked with local and state officials, including multiple gubernatorial administrations, on bringing its campuses to Virginia and expanding its footprint in Richmond.

“Virginia generally is very supportive in their economic development efforts to help make it easy for companies like ours to make the sort of massive investments necessary to move your location into the state. They’ve been very supportive. They have gone the extra mile,” Florance says.

The state’s fiscally responsible as well, El Koubi points out. In November 2023, Fitch Ratings affirmed the Virginia government’s AAA long-term issuer default rating, the highest rating Fitch issues. In September, S&P Global Ratings affirmed the commonwealth’s AAA long-term rating on its general obligation debt outstanding, though its appropriation-backed debt received an AA+ rating. Virginia first received an AAA rating from S&P Global in 1962.

Additionally, the commonwealth has maintained a corporate income tax rate of 6% since 1972. “From a tax and regulatory standpoint, Virginia is a very reasonable, predictable, stable operating environment for businesses,” El Koubi says.

That steady corporate tax rate can reduce costs for businesses relocating from other states, providing a competitive advantage for Virginia. For example, neighbors Maryland and Washington, D.C., have an 8.25% corporate income tax rate.

When companies select his county for their headquarters, “it’s a vote of confidence in Arlington and Virginia’s business environment,” says Arlington Economic Development Director Ryan Touhill, “and like-minded companies take note of that.” Photo by Shannon Ayres

Sweetening the pot

Along with Fairfax County’s location, a factor in Hilton’s decision to relocate its headquarters there in 2009 from Beverly Hills, California, was that the move would significantly reduce operating costs, according to the Fortune 500 global hotelier.

“Northern Virginia places Hilton strategically in a central location near our nation’s capital, where we’ve had the benefit of operating in a stable business climate and have simultaneously reduced our operating costs,” Hilton’s senior vice president and global head of talent, Christine Maginnis, said in a statement to Virginia Business.

Similarly, while not always related to company costs, incentive packages offered by Virginia and its localities also help secure large economic development projects like headquarters relocations and major corporate campuses.

For example, CoStar’s Richmond campus, which predates its headquarters move to Arlington by nearly a decade, demonstrates the state’s success in tailoring benefits for companies.

In 2016, CoStar announced it would build a research and technology center in Richmond. Five years later, the company announced a $460.5 million expansion of its Richmond presence into its Corporate Innovation Campus, housing sales, marketing, software development and various other functions. CoStar expects to create 1,984 jobs and have 1 million square feet of office space in the expanded riverfront campus, which is expected to be completed in 2026.

As part of the benefit package for CoStar’s Richmond expansion, the state legislature approved a $15 million grant fund reimbursing the company for public infrastructure improvements, including commuter access and parking and pedestrian access. If, however, CoStar does not reach at least 90% of its pledged job creation and capital investment by Dec. 31, 2028, the company will have to repay an amount proportional to any missed targets. 

For CoStar’s Arlington headquarters relocation, Gov. Glenn Youngkin approved $3.5 million for a Virginia Economic Development Incentive Grant (a performance-based cash grant), and a $1.25 million grant for Arlington County from the Commonwealth’s Opportunity Fund, a cash grant awarded to local governments on behalf of a company to offset or reimburse certain project-related costs.

Nevertheless, economic incentives are generally just one of several factors that companies consider when locating headquarters or other major assets in Virginia, not the deciding factor.

For instance, when Boeing announced it would relocate its headquarters from Chicago to Arlington in May 2022, the Fortune 100 aerospace and defense contractor did not receive discretionary state incentives. Nor did Fortune 100 defense contractor RTX, at the time branded as Raytheon Technologies, which announced in June 2022 that it would move its headquarters from Massachusetts to Arlington.

Planning ahead

Access to an educated labor force is another important component of a company’s considerations when locating a headquarters, and another place where Virginia is strong.

“I would say that one of the key things that attracted us to Virginia is the higher education system — Virginia Tech, VCU, James Madison, just a whole range of great educational institutions [that] gave us the confidence that we would have the workforce we’d need,” says CoStar’s Florance.

Amazon’s decision to build HQ2, its East Coast headquarters, in Arlington was a “catalyst” for other companies, says Virginia Economic Development Partnership President and CEO Jason El Koubi. “It sent a signal to the rest of the world … that Virginia is sort of America’s corporate hometown.” Photo by Matthew R.O. Brown

In U.S. News & World Report’s education rankings for states, Virginia ranks No. 10 in education overall, No. 9 in pre-K-12 education and No. 20 for higher education.

In Arlington, 78% of the county population holds a bachelor’s or higher degree, according to the 2023 U.S. Census Bureau American Community Survey one-year estimate.

Additionally, Virginia is ripe to target businesses seeking tech talent. Part of the state’s successful bid to land Amazon HQ2, Virginia’s Tech Talent Investment Program aims to produce 31,000 in-demand computer science and related graduates in the next two decades. The program is 2 1/2 years ahead of schedule, according to El Koubi.

It also showed Virginia’s commitment to a long-term strategy, says Chris Lloyd, director of infrastructure and economic development with McGuireWoods Consulting: “I think that that showed that Virginia wasn’t just in it for the short term, but that we were going to build this 20-year pipeline of tech talent and obviously everything else associated with that. … Instead of thinking short term, we thought long term, and leading companies are recognizing that.”

The tech talent program has fueled large state investments in higher education infrastructure, such as Virginia Tech’s $1 billion Innovation Campus in Alexandria, which enrolled its first class in 2020 in temporary space. The campus’ first academic building is set to open in spring 2025. Meanwhile, George Mason University is building its $178 million Fuse at Mason Square, which will have 345,000 square feet for research and development labs, corporate innovation centers and related facilities. 

“Almost every business operation now is in part sort of a tech operation, where, corporate headquarters included, … they need tech talent as part of their overall talent needs, and so we’re really doubling down on that and investing in our talent pipeline and solidifying that as one of Virginia’s differentiators,” El Koubi says.

When ASGN moved its headquarters from Calabasas, California, to Henrico County, announcing in 2020 that it would invest $12.4 million on the move, the decision was partly because the Fortune 1000 IT company already had a major subsidiary, Apex Systems, headquartered in Henrico, but ASGN President and CEO Ted Hanson also cited the state’s talent pipeline.

“Virginia’s strong pipeline of information technology talent for both the commercial and government sectors make it an ideal place for us to have our headquarters and continue to grow,” Hanson said in a statement at the time.

Boeing was also attracted to Virginia in part because of its talent pool, according to a statement then-CEO Dave Calhoun made during its announced relocation from Chicago: “The region makes strategic sense for our global headquarters given its proximity to our customers and stakeholders, and its access to world-class engineering and technical talent.”

Boeing had previously made a $50 million, multiyear commitment to Virginia Tech’s Innovation Campus.

It’s “pretty extraordinary for a company to pick up its headquarters and move to another state,” says VEDP President and CEO Jason El Koubi, noting Virginia’s wins in attracting multiple large corporate headquarters from companies like Boeing, RTX and CoStar in recent years. Photo by Matthew R.O. Brown

Location, location, location

Outside of tech talent, corporate headquarters need a large professional services core, and the Northern Virginia and Richmond regions offer that, says Lloyd. If you’re going to be establishing a headquarters, he says, “you need to have large law firms and large accounting firms and large ad firms and all the cluster around you.”

Virginia’s central Eastern Seaboard location gives it another boost in headquarters location decisions. “Virginia offers corporate headquarters companies proximity to key economic hubs around the East Coast [and] critical consumer markets,” El Koubi says.

Plus, Northern Virginia features two major airports, with Washington Dulles International Airport offering nonstop flights to 59 international destinations. And the statewide Port of Virginia system, which processed 3.5 million 20-foot equivalent units in fiscal 2024, provides convenient shipping and rail access. 

“In Northern Virginia, the airports are a critical factor for a global company [that has] people coming in from around the country and around the world,” says Florance. The headquarters building in Rosslyn was particularly appealing because of its location on the Metro line between Ronald Reagan Washington National Airport and the Dulles airport, he says.

RTX’s 2022 announcement of its headquarters move to Arlington cited the Washington, D.C., region “as a convenient travel hub for the company’s global customers and employees.” And in 2009, Hilton President and CEO Christopher Nassetta touted the commonwealth’s “central location from which to operate a global organization.”

Additionally, Northern Virginia’s proximity to the nation’s capital and the Pentagon makes the region attractive for headquarters, particularly for federal contractors.

“It’s appealing to be headquartered in the D.C. area, not just from a talent access perspective or business climate perspective in Virginia, but because [companies] have close proximity to the federal government from a lobbying and government affairs standpoint,” says Michael Hartnett, JLL’s research lead for the mid-Atlantic region.

Virginia’s competitive advantages for landing corporate headquarters also have grown through the wealth of companies that have previously relocated to the commonwealth.

“Part of what makes Virginia a very business-friendly state and a very strong ecosystem for headquarters,” El Koubi explains, “is the fact that you have a very high density of corporate headquarters in Virginia. … These headquarters companies like to cluster to some extent, in part because of the talent but also because of some of the things that a corporate headquarters needs, including connectivity to the rest of the country and the rest of the world.”

On the local level, Arlington also is profiting from its record of attracting companies like Amazon, Boeing, RTX and CoStar.

“When these companies select us,” Touhill says, “it’s a vote of confidence in Arlington and Virginia’s business environment, and like-minded companies take note of that.” 

As data centers grow, Amazon and Dominion explore small nuclear reactors

With power consumption by data centers and AI projected to more than quadruple in Virginia in the next 15 years, Amazon.com and Dominion Energy Virginia have entered into an agreement to explore potential development of small modular nuclear reactors at North Anna Power Plant in Louisa County, the two companies announced at an event Wednesday at Amazon’s HQ2 East Coast headquarters in Arlington County.

Dominion and Amazon’s memorandum of understanding means the companies will “jointly explore innovative ways to advance SMR development and financing while also mitigating potential cost and development risks for customers and capital providers,” according to Dominion’s announcement.

“This is a milestone along the path,” Amazon Web Services CEO Matt Garman said at Wednesday’s event. “There’s a ton that we need to do between here and there, and there’s a lot of work that needs to go into this, but this is a really important milestone that we’re celebrating today.”

At Wednesday morning’s event, Gov. Glenn Youngkin, U.S. Sens. Tim Kaine and Mark Warner and Dominion Energy Virginia President Ed Baine were on hand, among other state and national dignitaries.

“I am thrilled that Virginia is among the first states to take this big step,” Youngkin said. “Just two-and-a-half years ago, Virginia was literally accelerating on what has been an uninterrupted renaissance in growth, job growth and investment by companies who’ve committed $83 billion to expand or come to Virginia, and hire more people than we’ve ever had working before in the history of the commonwealth.”

He noted that the state is “poised to take this giant step with our partners,” as home to the nuclear Navy, multiple research universities and Dominion.

In his comments, Kaine also mentioned Lynchburg-based nuclear fuel producer BWX Technologies and Framatome Inc., the North American subsidiary of the French nuclear equipment, services and fuel producer, as other significant players in Virginia’s nuclear energy sector. “Amazon is the largest power user in the United States,” Kaine said. “That AWS is here, and that AWS is endeavoring to help us advance our innovation together with these other innovators in Virginia makes perfect sense.”

As of now, only two SMRs are in operation — one in Russia and the other in China — and Virginia likely won’t have its own SMR before the mid-2030s.

Warner, who chairs the Senate’s Select Committee on Intelligence, said Wednesday that energy innovation is important also as a matter of national security, particularly as the U.S. races to catch up with China’s innovations. “National security is not simply the nation state that has the most tanks and guns and ships and planes, but increasingly, it’s going to be who can win the battle in technology competition.” China, he added, is constructing “30 nuclear plants even as we speak. They have a goal of adding 150 more by 2035.”

However, he said, Virginia is “the nuclear capital for the country,” with 100,000 people already working in the nuclear sector in the commonwealth, including sailors, university researchers and employees at BWXT, Framatome, Huntington Ingalls Industries and other companies.

Ambitious plans

Amazon’s agreement with Dominion was just part of its news Wednesday, as the global e-tail giant announced it has signed three agreements to support development of small modular reactors, or SMRs, including one in the state of Washington with Energy Northwest, to develop four advanced SMRs. According to Amazon’s announcement, the four reactors would generate roughly 960 megawatts of electricity at full operation, beginning in the early 2030s. Amazon, which in March acquired a nuclear-powered data center campus in Pennsylvania from Talen Energy, also has committed to invest in SMR developer X-energy, whose reactor design will be used in the Energy Northwest project.

“Nuclear is a safe source of carbon-free energy that can help power our operations and meet the growing demands of our customers, while helping us progress toward our Climate Pledge commitment to be net-zero carbon across our operation by 2040,” Garman said in a statement released Wednesday morning.

Dominion previously announced in July that it had issued a request for proposals to evaluate the feasibility for a small nuclear reactor to be developed at its North Anna power plant, where it has two conventional, large nuclear reactors. Nuclear technology companies received the RFP, which was not a guarantee to build an SMR but would be the first step in exploring whether such a step was feasible, the Fortune 500 utility said in July.

On Wednesday, Dominion Energy Virginia’s Baine said that the “site is well on its way to be able to be developed,” and that he expects Dominion to make a decision on the winning proposal before the end of the year. He also said that X-energy is among the companies that have submitted a proposal.

The RFP, Baine added, will “inform us how we want to move forward with companies for additional small modular reactors as well.”

Virginia Secretary of Commerce and Trade Caren Merrick said Wednesday that she expects Youngkin to soon issue an executive order about accelerating permitting for nuclear sites, and the state has invited X-energy to come to Virginia for manufacturing.

Competitor Google preempted Amazon’s announcement by a day, announcing on Tuesday that the tech company had reached an agreement with Kairos Power to develop and purchase 500 megawatts of power from six to seven SMRs, planned to come online between 2030 and 2035. And in September, Microsoft forged a deal with Constellation Energy to offset power consumption by its data centers by reviving a portion of the Three Mile Island power plant, the Pennsylvania facility that in 1979 experienced a partial nuclear meltdown, the worst nuclear disaster in U.S. history.

Moving toward nuclear in Va.

Over the past couple of years, SMRs have been a big part of Virginia’s energy conversation, especially as data center growth has put more demands on the state’s power grid.

According to Dominion’s Integrated Resource Plan, filed Tuesday with the Virginia State Corporation Commission and the North Carolina Utilities Commission, power demand in Dominion’s coverage area in Virginia and North Carolina is expected to grow 5.5% annually over the next decade and double by 2039. Dominion has previously predicted that the data center industry in the state will demand 13 gigawatts of electricity by 2038, nearly five times the 2.8 gigawatts it used in 2023.

In Virginia, Amazon has agreed to explore the development of an SMR project near North Anna, bringing “at least 300 megawatts of power to the Virginia region, where Dominion projects that power demands will increase by 85% over the next 15 years,” according to Amazon’s news release. Additionally, Amazon signed an agreement to place a new data center next to a nuclear facility in Pennsylvania, a carbon-free energy source to power the data center.

In Loudoun County’s Ashburn area, where more than 70% of the world’s internet traffic courses through a corridor known as Data Center Alley, Amazon Web Services is the biggest fish in a gigantic pool. From 2011 to 2021, AWS invested more than $51.9 billion in Virginia, including building data centers. In January 2023, the company had at least 65 data centers in Loudoun in operation or under development, out of more than 200 data centers in the county, and AWS announced it planned to invest $35 billion by 2040 to build more data center campuses across the state.

Nationally, it’s anticipated that data centers will account for 17% of energy usage nationwide by 2030, according to a Bloomberg Intelligence report. That’s up from 4% in 2022 and 6% in 2026, according to data and projections from the International Energy Agency.

U.S. Secretary of Energy Jennifer Granholm, speaking at Wednesday’s event, called Virginia “the go-to place for the concentration of data centers,” and noted that AWS is the latest company to do “BYOP,” or “bring your own power” for data centers. “And this is the important piece I mentioned, that the technology companies know that in order for these data centers to achieve great community buy-in, bringing their own power with them is an important piece of that, so the rates are not raised on everyday citizens.”

She added that the Department of Energy is announcing $900 million in funding “for those who want to deploy even more … small modular reactors,” referring to applications opening for a program to support the first commercial-use SMR in the United States.

In the past couple of years, as artificial intelligence usage and overall digital use has grown, so has demand on Virginia’s power supply. In a May earnings call, Dominion Energy CEO Bob Blue said that the utility is receiving more requests to power larger data center campuses with larger energy demands of 60 to 90 megawatts per building, or several gigawatts for multibuilding campuses.

Baine said in an interview Wednesday that “there are a number of things that are driving energy demand within Virginia. Data centers [are] absolutely one of the big ones, but there’s also manufacturer electrification that is also increasing demand.”

The Joint Legislative Audit and Review Commission (JLARC) is conducting a study on data centers as some state legislators are pushing for high-volume power users to cover infrastructure costs to keep the state’s power grid reliable. The Virginia General Assembly forwarded all data center-related bills to 2025’s session so lawmakers could take JLARC’s study — expected to be released in November — into consideration.

Freelance writer Courtney Mabeus-Brown and Virginia Business Editor Richard Foster contributed to this story.

Amazon HQ2 impact on housing market short-lived, report says

The June opening of Amazon.com’s $2.5 billion East Coast headquarters in Arlington County only had a short-lived impact on home prices, and it’s hard to pinpoint HQ2’s direct impact due to other factors affecting residential costs, according to a report released this month by Bright MLS Research.

When Amazon announced it would bring 25,000 highly-paid workers to its second headquarters in Arlington County in November 2018, there were fears that the development would displace low-wage residents in the area, and only high-income earners could live there.

“It has been difficult to identify the true impact Amazon has had on housing costs — specifically on — home prices in Arlington and the surrounding area,” according to the Nov. 13 report. “Home prices tend to be high in places close to jobs and amenities. Arlington has an unparalleled location across the river from the District of Columbia. Furthermore, over the past two decades, the county has also pursued land use policies and economic development strategies to make Arlington attractive to young professionals and families.”

The pandemic was a complicating factor, upending where people work while the government’s response fueled housing demand, the report adds.

“While the announcement prompted both elation and anxiety, the effect on the housing market was short-lived as the COVID-19 pandemic and the resulting government and business responses to the pandemic have had a much bigger impact on the housing market,” Bright MLS Chief Economist Lisa Sturtevant said in a news release about the report.

Ryan McLaughlin, CEO of the Northern Virginia Association of Realtors, agreed that it’s hard to pinpoint the impact of HQ2’s announcement and its first phase of construction on the housing market. The pandemic started about two months after the start of HQ2’s construction.

“I think the full impacts of HQ2 are yet to be seen,” he said, pointing out the shift in how people work and other economic factors, such as mortgage rates, low inventory and high interest rates.

Amazon opened Merlin, its first tower, and one of the twin 22-story buildings that make up Metropolitan Park, HQ2’s first phase, in June. About 8,000 employees currently work there. Amazon delayed construction of HQ2’s second phase, known as PenPlace, in March, as the Fortune Global 500 tech company laid off 18,000 workers.

A George Mason University report in 2018 estimated only about 10% of Amazon’s workers would live in Arlington County, while 60% would live in other parts of Northern Virginia, Washington, D.C., Maryland and elsewhere, according to the new report.

“I think the long-term impacts, certainly for Arlington, Northern Virginia and the Greater D.C. metro region will be very strong,” McLaughlin said. “There’s a reason why HQ2 selected Northern Virginia as the place where they wanted to invest.”

Federal Contractors | Technology 2023: BRIAN KENNER

When Amazon.com was scouting for potential locations for its East Coast HQ2 headquarters years ago, Kenner was Washington, D.C.’s deputy mayor for planning and economic development, a position in which he worked hard to lure the e-tailer to the district, although ultimately Amazon picked nearby Arlington County. Now, Kenner works for the Fortune 500 goliath as head of HQ2’s economic development policy throughout the D.C. metropolitan area.

HQ2 opened its first new office tower in May, one of two towers in its first phase, and 8,000 employees are expected to be at work in Metropolitan Park by early October. Meanwhile, Kenner is also involved with Amazon’s in-kind and monetary donations, which have grown to $161 million across the metro region since 2018, Amazon announced in June. He also is a major player in the company’s plans for affordable housing, transportation, education and workforce training.

Before becoming D.C.’s deputy mayor, Kenner worked as city manager for Takoma Park, Maryland, and he also held management positions at Fannie Mae and Ernst & Young. An Iowa native, he has degrees from the University of Iowa and Harvard University’s Kennedy School of Government.

Federal Contractors | Technology 2023: BRIAN HUSEMAN

Huseman is one of the most prominent representatives of Amazon.com in Arlington, where the e-tailer held a grand opening for the first buildings on its HQ2 East Coast headquarters campus in June.

A former U.S. Department of Justice attorney and associate general counsel for the Federal Trade Commission, Huseman leads Amazon’s federal lobbying work and its community engagement efforts in the Western Hemisphere, including a project to make ocean shipping environmentally cleaner. In Virginia, Amazon has more than 36,000 employees, and HQ2’s Metropolitan Park will have about 8,000 workers moved in by the end of 2023.

A graduate of the University of Oklahoma College of Law and the University of Nebraska, Huseman serves on numerous professional and community boards, including the Information Technology Industry Council, Signature Theatre and the Mountain Gorilla Veterinary Project, for which he is board president. He also was part of the Blueprint Virginia 2030 Steering Committee, which created the Virginia Chamber of Commerce’s economic development plan for the state.

FIRST JOB: Working for Walmart in my Oklahoma hometown. It’s where I learned the importance of a customer service mindset.

July 2023 Top Five

1   |   36 Virginia companies make 2023 Fortune 1000

Thirty-six Virginia-based companies made Fortune magazine’s 69th annual Fortune 1000 list, and 24 Virginia companies made the elite Fortune 500. (June 5)

2   |   Amazon begins HQ2 move-in

Amazon.com Inc. began moving employees into the first phase of HQ2, its $2.5 billion East Coast headquarters in Arlington, the week of May 22. (May 22)

3   |   Caesars Danville opens temporary casino

Virginia’s third casino, Caesars Virginia’s 40,000-square-foot tent-like temporary casino, opened in May; the $650 million permanent resort is expected in late 2024. (May 15)

4   |   Norfolk City Council votes to purchase MacArthur Center

Council members approved plans to purchase the 23-acre downtown mall for up to $18 million. (June 7)

5  |   SCHEV director to step down

Peter Blake, long-time director of the State Council of Higher Education for Virginia, will step down by the end of 2023. (May 18)

Amazon HQ2 opens to high expectations

Let the tech wizardry begin: Amazon.com Inc. held the grand opening and ribbon cutting for the first phase of HQ2, the ecommerce goliath’s $2.5 billion East Coast headquarters in Arlington County, on Thursday.

Dignitaries in attendance included Gov. Glenn Youngkin, Arlington County Board Chair Christian Dorsey, JBG Smith Properties Chief Development Officer Kai Reynolds, Clark Construction Capital Group CEO Lee DeLong and three Amazon vice presidents.

“It has been incredibly rewarding to see everything that we thought our partnership could [be] materialize and deliver transformational change,” Dorsey said in a statement Thursday. “Congratulations to Amazon, my colleagues and to our entire Arlington community. This is a great moment in our history.”

Attendees were invited to tour Merlin, the first partially open tower at HQ2. It’s one of two 22-story twin towers erected as part of Metropolitan Park, HQ2’s first phase. Despite Thursday’s grand opening ceremonies, Merlin has been open since the week of May 22, when Amazon began moving about 2,000 employees into floors 1 through 14 of the building. 

Amazon plans to add 1,000 to 2,000 more workers per week during the summer, and expects to have all existing HQ2 teams moved into both towers by late September or early October. So far, the No. 2-ranked Fortune Global 500 company has hired 8,000 HQ2 employees locally, and when fully open, Met Park will be able to support more than 14,000 employees. 

Amazon thinks of its buildings “as almost living things,” Holly Sullivan, Amazon’s vice president of economic development and public policy, said during the first week employees moved in. Merlin — named after the codename for Amazon QuickSight, a cloud-based business intelligence service product — hummed with activity.

Metropolitan Park, the first phase of Amazon’s HQ2 East Coast headquarters, officially opened in late May, moving 2,000 employees into Merlin, one of HQ2’s 22-story twin office towers. Photo by Matthew R.O. Brown
Metropolitan Park, the first phase of Amazon’s HQ2 East Coast headquarters, opened in late May, moving 2,000 employees into Merlin, one of HQ2’s 22-story twin office towers. Photo by Matthew R.O. Brown

Plants line the staircase to Merlin’s second floor and are scattered throughout. With windowed garage-door-like walls on the ground floor tilted open during pleasant weather, Merlin can blur the distinction between inside and outside. “We think that our buildings do have personality,” Sullivan says. “We do want to help them grow. We do want to help them develop and evolve.”

As of Dec. 31, 2022, Amazon reported more than $598 million in capital investment in HQ2, according to its first incentive application to the Virginia Economic Development Partnership.

Amazon announced HQ2 would be coming to Virginia in November 2018, and state officials trumpeted an anticipated 25,000-person Amazon HQ2 workforce by 2030, the biggest economic development deal in the state’s history. Initially, HQ2 was intended to be a $5 billion project, split between Arlington and New York’s Long Island City neighborhood, before Amazon pulled back from its New York plans amid local backlash over government incentives.

But the unexpected arrival of the pandemic in 2020 — along with more people working remotely, followed by 18,000 layoffs by Amazon in 2022 and early 2023 — put a question mark on Amazon’s original plans for a bustling office campus in downtown Arlington.

Nonetheless, Amazon stands by its original HQ2 job creation goal, which would see it add 17,000 jobs over the next 6 1/2 years. “We are unwavering in our commitment to Virginia,” Sullivan says.

Office space isn’t obsolete for Amazon, which in May started a hybrid policy requiring at least three in-office days a week, although vice presidents set specific office policies for their teams. The e-tailer will adapt its spaces as needed, Sullivan says. Merlin includes conference rooms, team suites and a plethora of common areas with varied seating.

Amazon included Merlin’s 15th floor on the grand opening tour, although it was not yet open to employees. The company plans to open the remaining floors in phases. The lower floors of the second tower, named Jasper after the codename for an Alexa component that provides tools for customer settings, were set to be complete around the end of June.

Commonwealth Joe Coffee Roasters co-founder and CEO Robert Peck expects HQ2 to boost business. Photo by Matthew R.O. Brown
Commonwealth Joe Coffee Roasters co-founder and CEO Robert Peck expects HQ2 to boost business. Photo by Matthew R.O. Brown

A big landing

“We’re just really excited about this new milestone,” says Arlington Economic Development Director Ryan Touhill. “This is going to be really great to see these buildings come online. It’s really great to see Amazon’s commitment to the community, and it’s going to be great to see their workers coming in to National Landing and enjoying all the things that have been built there all throughout the pandemic.”

Composed of Potomac Yard, Crystal City and Pentagon City, the National Landing Business Improvement District came from the Crystal City Business Improvement District, which expanded its coverage in 2019 and changed its name in 2020. Economic development officials coined the term, but Amazon’s HQ2 announcement popularized it.

Amazon leases 387,000 square feet of office space in Arlington from Bethesda, Maryland-based JBG Smith, about 300,000 of which it will vacate this year as employees move into Merlin. JBG Smith is also HQ2’s primary developer and developed the roughly 109,000-square-foot entertainment and shopping Central District Retail area in National Landing. The developer owns 2,856 apartment units and nearly 7 million square feet of office space in the district, with 1,583 apartments under construction.

In March, Amazon confirmed it would pause construction on HQ2’s second phase, PenPlace, which was set to include 3.3 million square feet of office and retail space spread across three 22-story buildings, as well as the showcase spiral Helix building and 20,000 square feet for Arlington Community High School. But Amazon has since indicated it plans to move forward with PenPlace sometime in 2024, although it hadn’t released an official timeline as of early June, according to Arlington Economic Development.

Due to Amazon’s hybrid work policy, some observers have expressed concerns that area businesses will see less foot traffic than anticipated, but locals remain optimistic.

“Certainly, the numbers are a little bit different from pre-pandemic, where you sort of expected that generally people were on the five-day work schedule, but as their hiring increases, that still means many more bodies on the ground … [who are] able to patronize area establishments,” says Dorsey.

And, despite Amazon’s post-pandemic shift to hybrid work, Arlington and Alexandria will still benefit from an influx in residents who work in tech, says Terry Clower, director of George Mason University’s Center for Regional Analysis and the Northern Virginia chair of GMU’s Schar School of Policy and Government.

“With hybrid, maybe [commercial activity from office workers won’t be] as much, but if people are living there, that’s probably a more reliable market anyhow,” he says. “It shifts the nature of the demand a little bit — maybe it’s [a] more dinner than lunch kind of thing — but all of that just means that it’s still activity and it’s balanced out.”

Adjacent to the HQ2 video game room, the billiards room in Met Park gives employees a space to play pool or foosball or just work in a different setting. Photo by Matthew R.O. Brown
Adjacent to the HQ2 video game room, the billiards room in Met Park gives employees a space to play pool or foosball or just work in a different setting. Photo by Matthew R.O. Brown

Varied spaces

Met Park doesn’t offer free lunches, but it includes plenty of amenities and perks to welcome workers into the office. On the ground floor, employees and passersby can find free coffee at Good Company Doughnuts & Cafe. Employees have a bike storage room that wraps around part of the building, with racks for 620 bikes, as well as charging stations for e-bikes and options for bike repair, plus wash stations and showers.

Employees swiping into Merlin’s first “center of energy,” Amazon’s term for common areas or gathering spaces, are greeted by a strong smell of coffee emanating from Maryland-based Chesapeake Coffee Roasters, as well as a wall of grab-and-go drinks and snacks and a sitting area with booths. Baltimore-based Zeke’s Coffee is set to be the roaster at Jasper. 

Head up the serpentine central staircase, and you’ll discover an arts and crafts room with a window-lined wall, high wooden tables and dogwood decorations hanging from the ceiling, a nod to Virginia’s state flower. Teams can book the room, but for several hours a day the studio remains open for employees to use as they wish.

If craft time isn’t their preferred break activity, workers can step next door into the video game room or the dimly lit, carpeted billiards room with pool and foosball tables, as well as more seating options. For a surprise, pull the book titled “How to Throw a Party” in the bookcase and prepare for music and flashing lights.

Met Park also is dog-friendly — perhaps too much so, as barking is a given — with a wall dedicated to photos of employees’ pets, and dog stalls for employees to secure their pups while they grab food from an eatery, like The Daily, which features rotating daily specials of foods from around the world.

Merlin also incorporates outdoor spaces, including terraces and dog runs, and the third-floor terrace overlooking Met Park’s 2.5-acre public park has two electric grills.

Although more offices now have facilities for new moms to pump milk in privacy, Amazon’s mothers’ suite — decorated with large photos of baby ducks — offers quiet rooms with armchairs, provided pumps and breast milk bags, as well as a fridge to store milk, a sink and a changing table. The two towers will have 27 mothers’ rooms across their two suites.

A design adaptation resulting from the pandemic and employee feedback, team suites provide collaborative spaces that teams can reserve to work on a project. Suites have different themes, but all include a lounge, flex space and variously sized meeting areas.

“One of the things we learned about our employees and the way that they missed working was more of that collaboration, so we’ve … been more intentional in this building and in Jasper to create more of those convenient spaces for team building [and] quick meetings, whether it be for two weeks or two hours,” Sullivan says.

A broader reach

Amazon often proclaims its commitment to communities where it has a significant presence — whether it’s through the $2 billion Housing Equity Fund active in Arlington, and Nashville, Tennessee, and Washington’s Puget Sound region, or allocation of retail space in its office buildings.

Met Park will house 14 ground-floor retailers, including a day care center that’s open to the community. Merlin’s second floor has a 700-person meeting room available to the community for reservations, with shutters along its window-lined wall that automatically adjust to outdoor light changes throughout the day or can be closed by remote control. The room’s skylights feature electrochromic glass that can adjust to let in or block sunlight.

The public park includes looping walking paths, a children’s playground and an off-leash dog walk, as well as a dog park that will open once grass has firmly taken root.

On the 15th floor, Amazon is growing an urban garden with vegetables like diva cucumbers, a nearly seedless variety. Washington, D.C.-based urban farming company Loving Carrots harvests the vegetables. Amazon donates them to Arlington-based Kitchen of Purpose, which uses the meals its culinary trainees cook for its food assistance program.

Since January 2021, the company says, it has committed $795 million in loans and grants to create or preserve 4,400 affordable housing units in and around Arlington and Washington, D.C. According to apartment listing service Apartment List, the median rent for a one-bedroom unit in Arlington was $2,096 in June, and the median for a two-bedroom unit was $2,508. The median price for homes sold in Arlington was $680,000 as of April, according to the Northern Virginia Association of Realtors.

Beyond offering the latest in office design for corporate employees, HQ2 is expected to spur further development in the surrounding area of National Landing and across Northern Virginia.

Amazon’s campus is the crown jewel of National Landing, says Tracy Sayegh Gabriel, president and executive director of the National Landing Business Improvement District, who notes that there are other major area developments coming online, too. One is developer JBG Smith’s Crystal City Water Park, a 1.6-acre park, now under construction, which will have 11 restaurants and water features, including a body of water surrounded by a scalloped wall and topped by a bar.

“We’re that lived-in downtown that so many downtowns are aspiring to be,” Gabriel says. “As we look at this pipeline between the ambitious footprint of Amazon and this 8,000-unit residential pipeline [ranging from proposed units to buildings under construction], we are going to continue to have that sought-after balance of jobs and residents.”

Already, there is a new Metrorail station at Potomac Yard in Alexandria, and Atlanta-based real estate company Cortland has spent $1 billion to acquire, rebrand and renovate several apartment buildings in Rosslyn, Pentagon City and Clarendon.

At least for Arlington, “the benefits [of HQ2] will still be substantial, even if they are a little slower to materialize than maybe we thought a year ago,” Dorsey says.

Retailers in the immediate area around HQ2 are expecting a boost as well. One block down from Met Park, Commonwealth Joe Coffee Roasters has already seen an uptick in sales, says Commonwealth Joe co-founder and CEO Robert Peck. Sales increased from an average of 520 transactions a day the week of April 23 to almost 600 transactions a day during the week that Amazon opened Merlin.

“On a nice day, [the park] could be the difference of someone coming to Commonwealth Joe, if they can get their cup of coffee and find somewhere to sit,” Peck notes.

Ripple effects

Along with smaller road and bike lane improvements, HQ2’s opening coincides with major infrastructure projects, including a pedestrian bridge connecting Crystal City to the Reagan National Airport, which the Arlington County Board approved $4.2 million to design. The bridge is one of the transportation projects that Virginia agreed to partially fund because of HQ2.

If Amazon decided to stop growing HQ2, the halt might affect some infrastructure improvement timelines, Clower says, but either way, “those are great investments in creating walkable, easy commute areas,” that will aid development independent of Amazon.

Also, state economic development officials expect HQ2 and Virginia’s correlating investments in the region and talent, to help Northern Virginia attract more corporate headquarters and tech companies in the future.

“I’m most excited about securing the corporate headquarters of one of America’s most innovative companies in Virginia through a partnership that is not only going to help Amazon thrive in its new corporate headquarters, but that is going to enable Virginia’s people and other companies to thrive,” says Jason El Koubi, president and CEO of the Virginia Economic Development Partnership and a key player in the team that lured HQ2 to Virginia.

Major defense contractors Boeing Co. and Raytheon Technologies Corp. made summer 2022 announcements that they would move their corporate headquarters to Arlington, although it isn’t known if HQ2 influenced either decision.

Amazon is contributing to a change in how people view Northern Virginia, which had long been seen by outsiders as “kind of a government town,” says Victor Hoskins, president and CEO of the Fairfax County Economic Development Authority. As Arlington’s former economic development director, he was a leader in the team that landed HQ2.

“We’re not viewed that way anymore,” he says. “People view us as a center of technology. They view us as a place of innovation, and I think Amazon had a lot to do with that.” Amazon Web Services and Microsoft Corp. significantly increased their presences in the region in the years following Amazon’s 2018 announcement, and, in April 2019, Google LLC announced it would be the anchor tenant at Fairfax County’s Reston Station office building.

That announcement, combined with other tech company expansions in the area, helped cement the region’s new reputation, Hoskins adds. Also, there’s the higher education component of Virginia’s bid to bring in Amazon, which the company identified as its biggest motivator for choosing the commonwealth and which will help the state grow its own tech workers.

The state’s Tech Talent Investment Program aims to produce 31,000 in-demand computer science and related graduates in the next two decades. That’s led to the construction of Virginia Tech’s $1 billion Innovation Campus in Alexandria and George Mason University’s $250 million Institute for Digital InnovAtion (IDIA) in Arlington’s Rosslyn-Ballston corridor. Virginia Tech’s classes are already operating in temporary classrooms in Alexandria, and its first academic building, at a cost of $302 million, is set to open in fall 2024. At its full buildout, the Innovation Campus will produce about 500 master’s program graduates and 50 doctoral candidates annually.

“The state that leads in talent development will be the state that leads in economic development,” El Koubi says. “Virginia is on some very, very solid ground in that respect.” 

2,000 Amazon employees move into HQ2 during first week

About 2,000 employees moved into the first open tower at Amazon.com Inc.’s $2.5 billion HQ2 East Coast headquarters in Arlington this week.

Floors 1-14 of Merlin, one of Amazon’s two 22-story office towers in Metropolitan Park, the first phase of HQ2, opened Monday. The tech giant anticipates opening the remaining floors in phases, likely two floors at a time, with plans to have the 15th floor open before the end of June. The company has hired 8,000 employees locally so far.

“On the first day, in the afternoon, people were bringing their kids in and their partners, I think to show off [the building],” said Rachael Lighty, Amazon’s head of public relations for policy and HQ2.

Amazon expects to have roughly 1,000 to 2,000 more employees move in by teams each week. The lower floors of HQ2’s second building, dubbed Jasper, should be completed in the next 30 to 40 days, around the end of June, according to Holly Sullivan, Amazon’s vice president of economic development and public policy. By the end of September or early October, all HQ2 teams will be invited into the towers’ 2.1 million square feet.

Under its current office policy, Amazon is “encouraging” employees to come into the office at least three days a week, but vice presidents set office policies for their teams.

HQ2 will house a variety of teams, including devices, Amazon Web Services and corporate functions like finance, legal, public policy, communications and corporate facilities teams.

“It is truly a headquarters. We have that diversity of roles within HQ2,” Sullivan said.

Met Park’s two towers can house more than 14,500 employees. Despite beginning large-scale layoffs in November 2022, Amazon has remained firm on its commitment to create 25,000 jobs at HQ2 by 2030. The global e-tailer said in March that it was delaying HQ2’s second phase, PenPlace, but has been resolute that the delay is not a cancellation: “Our commitment remains unchanged,” Sullivan said.

Met Park will house 14 ground-floor retailers and also includes a 2.5-acre public park with walking paths, a children’s playground and a dog walk, as well as a dog park that will open once grass has firmly taken root.

Amazon begins HQ2 move-in

Amazon.com Inc. is moving more than 8,000 employees into the first phase of HQ2, its $2.5 billion East Coast headquarters in Arlington’s emerging National Landing area, this week. The e-tailer plans to officially open HQ2’s first phase, Metropolitan Park (Met Park), in June and to complete its move-in by the end of the summer. However, the No. 2-ranked Fortune Global 500 company said in March that it was delaying construction on HQ2’s second phase, PenPlace.

Amazon expects to create 25,000 jobs for the project by 2030 and is eligible for up to $550 million in state grants, should it meet the required annual hiring goals and average annual wages.

“This project is extraordinary in many respects,” Arlington County Board Chair Christian Dorsey said in a statement. “It will bring us significantly closer to fulfilling the community’s vision of Arlington and National Landing as an urban neighborhood with a better balance of office, residential and retail development, more and better public spaces and more and better access for pedestrians and cyclists.”

Met Park consists of 2.1 million square feet of office space and more than 50,000 square feet of retail space housing 14 businesses, as well as a 2.5-acre park. The campus is on park to receive a LEED Platinum certification, the highest LEED certification level.

Met Park’s two 22-story, 327-feet-tall office buildings can house 12,500 employees. One tower is named Jasper, the codename for an Alexa component that provides tools for customer settings. Amazon has named the other tower Merlin, after the codename for Amazon QuickSight, a cloud-based business intelligence service product that can create interactive dashboards. The buildings have a total of 62 elevators.

A street view of Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
A street view of Met Park. Photo courtesy Amazon.com
An aerial view of outdoor space within Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
An aerial view of outdoor space within Met Park. Photo courtesy Amazon.com Inc.
A terrace in Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
A terrace with grills in Met Park. Photo courtesy Amazon.com Inc.
An entrance to the first phase of Amazon's HQ2, Met Park. Photo courtesy Amazon.com Inc.
An entrance to Amazon’s HQ2 offices. Photo courtesy Amazon.com Inc.
A stairwell and escalator inside Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
A stairwell and escalator inside Met Park. Photo courtesy Amazon.com Inc.
A reception desk in Amazon.com Inc's HQ2. Photo courtesy Amazon
A reception desk in Amazon.com Inc’s HQ2. Photo courtesy Amazon
An employee gathering space in Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
An employee gathering space in Met Park. Photo courtesy Amazon.com Inc.
An outdoor terrace in Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
An outdoor terrace in Met Park. Photo courtesy Amazon.com Inc.
Snack and beverage options in Met Park
Snack and beverage options in Met Park. Photo courtesy Amazon.com Inc.
A presentation room inside Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
A presentation room inside Met Park. Photo courtesy Amazon.com Inc.
A seating area in Met Park, the first phase of Amazon's HQ2. Photo courtesy Amazon.com Inc.
A seating area in Met Park. Photo courtesy Amazon.com Inc.
A seating area in Met Park. Photo courtesy Amazon.com Inc.
A seating area in Met Park. Photo courtesy Amazon.com Inc.

The towers include “centers of energy,” Amazon’s term for spaces for employees to gather, including four coffee shops and three all-electric commercial kitchens. The areas are designed to handle 30% of the offices’ employee capacity, an intentional move by the company to encourage employees to “venture out into the neighborhood,” according to a news release.

The 14 ground-floor retailers include a bike shop, a dog day care, a fitness studio, an early childhood education center, a spa, restaurants and the Museum of Contemporary Art (MoCA) Arlington’s Innovation Studio.

The towers have outdoor spaces within their designs: about 2.7 acres of rooftop landscaping, about an acre of green roof with native plants, two event terraces, two café terraces, one garden terrace, an urban farm and outdoor kitchens.

The public park includes walking paths, a dog run and a children’s play area and garden.

For commuting employees, Met Park has 620 bike racks, four levels of below-grade parking with 290 electric vehicle charging stations and pedestrian pathways for employees taking the Metro. On May 19, the Washington Metropolitan Area Transit Authority opened the Potomac Yard-VT station, anchored by Virginia Tech’s $1 billion Innovation Campus and two stops away from HQ2.

Amazon delays construction on HQ2

Amazon.com Inc. is delaying construction on the second phase of HQ2, its $2.5 billion East Coast headquarters in Arlington County.

The news comes as Amazon plans to open HQ2’s first phase, Metropolitan Park, in June, and as the Fortune Global 500 tech company laid off a record 18,000+ workers amid concerns over slowing revenues and a potential recession.

Amazon had anticipated the groundbreaking for its second phase, PenPlace, to occur this year. While the e-tailer has not offered an updated timeline for construction on PenPlace, Amazon has begun some pre-construction work, including applying for permits, and expects to continue such efforts this year.

In a statement, Amazon Vice President of Global Real Estate and Facilities John Schoettler said, “We’ve already hired more than 8,000 employees in HQ2 and we’re excited to welcome them to our new Met Park campus 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.”

Bloomberg first reported the construction delay.

Amazon originally announced that HQ2 would create 25,000 jobs by 2030, and the company says its hiring goals have not changed.

During the COVID-19 pandemic, Amazon rapidly grew its global workforce, ending 2021 with more than 1.6 million employees, up from 798,000 in the fourth quarter of 2019, according to CNBC. The company began layoffs in November 2022, at the time expected to total 10,000 employees, and in January, that number grew to 18,000, according to The Wall Street Journal. Amazon, which also paused corporate hiring at the same time, is one of several tech giants that have begun large-scale layoffs in recent months, including Google LLC, which cut 12,000 employees, and Meta Platforms Inc., which cut more than 11,000 people.

Amazon has pulled back on other real estate projects over the past year. Citing the need to reevaluate designs for hybrid work environments, Amazon pausing construction in July 2022 on six office buildings in Bellevue, Washington, and Nashville, Tennessee, according to Reuters.

The company has not yet made a decision on whether it will modify its PenPlace plans. Plans for HQ2’s second phase currently include 3.3 million square feet of office and retail space spread across three 22-story buildings, as well as the distinctive spiral Helix building, along with 100,000 square feet of retail space and about 2.5 acres of public space. In April 2022, Arlington County approved the plans for PenPlace, which. include 20,000 square feet for Arlington Community High School.

Amazon purchased the 11-acre development site for PenPlace for $198 million in June 2022 from Bethesda, Maryland-based developer JBG Smith Properties, Amazon’s HQ2 development partner. Unless the Arlington County Board grants an extension, Amazon’s site plan approval will expire on April 23, 2025, if the company has not received a footing to grade permit to construct the second phase’s first building by then. Amazon’s use permits for the proposed public park and high school will also expire on April 23, 2025, if construction or operation has not started by then, according to Arlington County Board agenda documents.

“We continue to work with Amazon to advance plans for PenPlace, and look forward to helping Amazon realize its complete vision for HQ2,” JBG Smith CEO Matt Kelly said in a statement.

HQ2’s roughly 2.1 million-square-foot first phase consists of two 22-story office buildings, about 50,000 square feet of retail space, a park and a 700-person meeting center.

In February, Amazon announced that employees would be required to work in person at least three days a week beginning in May, a divergence from its previous remote work policy. A group of Amazon employees released a petition calling for remote work to continue, according to CNBC.

Amazon is eligible for up to $750 million in incentives from a state economic development package based on its annual hiring goals at a stipulated average annual wage. While the company became eligible to submit its first payment application on April 1, 2020 — reflecting its job creation through Dec. 31, 2019 — and receive its first payment in fiscal year 2024 — which begins July 1, 2023 — Amazon instead submitted a progress report, according to Suzanne Clark, Virginia Economic Development Partnership’s managing director of communications and marketing.

Amazon submitted progress reports in April 2021 and 2022 as well. The e-tailer has until April 1 this year to submit its first application for payment, which would reflect its performance from 2019 through 2022. Amazon would then be eligible to receive its first grant payment in fiscal year 2027, meaning on or after July 1, 2026.

The company said it didn’t want to begin requesting payments until it reached key milestones, like the opening of Met Park, because it intends to be a community partner. In the memorandum of understanding between the state and Amazon, the tech giant’s cumulative job creation goal was 4,983 by Dec. 31, 2022. With 8,000 new jobs so far, Amazon is well ahead of its hiring timeline.

Arlington County Board Chair Christian Dorsey said the delay is not a cause for concern. “As we all negotiate the post-pandemic reality, 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,” he said, “so it’s not incredibly surprising that Amazon is taking a pause before beginning the second phase of a project for which they haven’t fully opened the first phase.”

Arlington will continue its infrastructure projects around the site, like the 12th Street South Complete Street Project, which will create a streetscape with landscaping, sidewalks, pedestrian ramps and streetlights on 12th Street between Clark and Eads streets. The project will also create center-running transit-only lanes.