Amazon, Laying Off 18K, Pauses Second Half of HQ2 Project

On the same day that the lead developer of Amazon’s HQ2 project, JBG Smith, praised the tech giant for its “reaffirmed commitment” to the full project, Amazon announced on Friday it is pausing construction on the 3.3M SF second half of the Virginia complex, which is planned for 25,000 workers.

The move comes as Amazon ramps up what it announced in January would be the layoff of 18,000 workers, about 6% of its workforce—the largest cut announced to date in a wave of tech sector layoffs that began in H2 2022. Amazon’s cuts primarily are coming from its retail and human resources divisions.

A report Friday in the New York Times called the tech giant’s HQ2 pause “emblematic” of a tech sector that is slashing payrolls and downsizing office footprints—while increasingly embracing remote work and “struggling to figure out what to do with their offices as their workers continue to spend at least part of the time working from home,” the Times report said.

“For HQ2 to be on pause is emblematic of the pause that tech has hit all across the industry,” Jeffrey Shulman, a University of Washington marketing professor who has studied Amazon’s impact on Seattle, told the NY Times. “HQ2 is the perfect emblem of where we were and where we are, and just how different they are.”

Amazon, which reported a net loss of $2.7B in 2022, also has eliminated thousands of warehouse jobs it was planning to add to its payroll—by closing or cancelling 99 logistics facilities encompassing 32M SF in 30 states, a campaign to slash operating and capital expenses that will continue in 2023, according to a report last week from MWPVL.

In pausing the second half of HQ2, Amazon is delaying the heart of the project, a cluster of office towers in the National Landing site near the Potomac River in Arlington and Alexandria.

The first phase of HQ2—a 2.1M SF office cluster known as Met Park—is on schedule to be completed in June, JBG Smith announced on Friday. Met Park will provide office space for an 8K portion of Amazon’s workforce that is scheduled to move in when the tower opens.

The construction pause will delay Pen Place, the second and larger phase, planned to encompass 3.3M SF across three office buildings and The Helix—the signature centerpiece of HQ2, a spiraling glass “double helix” amenity center with “biophilic” landscaped terraces that will feature “plantings native to the Mid-Atlantic region.”

JBG Smith’s press release in which the REIT said Amazon had “recently reaffirmed” its commitment to the full HQ2 project came out several hours after the news about Amazon was reported.

“We are greatly encouraged by Amazon’s recently reaffirmed commitment to its second headquarters project and to hiring at least 25,000 workers at HQ2,” JBG Smith CEO Matt Kelly said, in a statement.

JBG’s release said the developer is “moving eagerly ahead” with several projects surrounding HQ2, including Virginia Tech’s $1B Innovation Campus, a 1,500-unit apartment complex in National Landing and a retail village in the neighborhood it says will have 55 new tenants in the next 18 months.

“All of these projects, along with billions of dollars in infrastructure improvements, have been made possible by Amazon’s commitment to National Landing,” Kelly added, in the statement. “We continue to work with Amazon to advance plans for Pen Place and look forward to helping Amazon realize its complete vision for HQ2.”

JBG Smith sold the National Landing site for HQ2 to Amazon for $354M in 2018, then was named the lead developer by Amazon for the project. While building HQ2, the DC-based REIT has initiated numerous projects in the area.

In Q4 results released last month, JBG Smith posted losses of nearly $19M. The federal government, which leases about 26% of JBG Smith’s DC portfolio, and Amazon, which leases about 14%, both are downsizing office footprints, with Amazon’s leases expiring this year as the tech giant moves into the completed Phase I of HQ2.

In a quarterly letter to investors, Kelly expressed confidence that JBG Smith’s results would improve in 2023 as it completes its strategy of transitioning to a majority multifamily platform.

Amazon’s layoffs are revealing the scope of the tech giant’s leased office footprint in NYC. Amazon has a history of spreading its footprint in a city throughout a bevy of buildings, including its Seattle HQ, which its employees are spread around 15 buildings.

Filings with NYC’s Department of Labor in late January indicated that 299 employees being laid off by Amazon effective April 18 work at more than five different locations in Manhattan.

The affected Amazon offices include 1440 Broadway; 7 West 34^th Street, where Amazon leased 417K SF from Vornado in 2014 for 17 years; 450 West 33^rd Street, a Brookfield building known as 5 Manhattan West, where Amazon inked a 15-year deal for 360K SF in 2017; 410 10^th Avenue, a building where Amazon is the anchor tenant.