Online retail giant Amazon has paused the construction of its new headquarters in Virginia as revenue losses weigh heavily on the company.
The facility in Arlington, Virginia would be Amazon’s second headquarters.
But a poor 2022 financial performance, that saw the company register over $2 billion in losses, has scuppered the plans.
The Seattle-based e-commerce giant is developing its Arlington base, HQ2, in two phases—the Met Park and PenPlace.
The company has decided to pause construction in PenPlace as Met Park is believed to be enough to house the firm’s existing employees.
Amazon’s decision to pause HQ2 construction comes as the company reported poor financial performance last year.
For 2022, Amazon posted a net loss of $2.7 billion, its biggest annual loss on record.
The last time the company failed to make a profit was in 2014. The firm also announced plans to discontinue AmazonSmiles, a charity program, as part of cutting costs.
In January, the company said that it was laying off 18,000 employees.
The number included job cuts Amazon had already announced in November.
“Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so,” CEO Andy Jassy said in an employee memo at the time.
“These changes will help us pursue our long-term opportunities with a stronger cost structure.”
When the HQ2 project in Virginia was announced in 2018, state Democrat Governor Ralph Northam called it a “big win” for the state.
The project was estimated to bring in over $3.2 billion in new state general fund revenues as well as create 25,000 direct jobs.
In return, Virginia promised incentives, including $22,000 per each new Amazon job, provided the average salary of these jobs is $150,000 per annum.
For the 25,000 projected jobs, the state had promised incentives worth around $550 million.
In addition, Amazon was also offered a cut on its hotel-tax revenue estimated to be around $23 million.
New York Senate Deputy Majority Leader Michael Gianaris (D), who opposed Amazon’s HQ2 project proposal in Queens, NYC, has criticized the company for stalling the Arlington project.
“Amazon’s announcement shows once again that paying off a historically wealthy corporation with massive subsidies to make a single office siting decision is bad policy,” he said, according to a March 4 tweet by John Campbell, a reporter at news outlet WNYC.
“It also demands we take a different approach to the use of public dollars that does not rely on providing scarce resources to those who need them least while continuing to shortchange the services that would actually help people’s lives improve.”
Even though the PenPalace construction has been paused, Amazon insists that its long-term intention and commitment remain “unchanged.”
The company’s plan includes bringing 25,000 corporate and tech jobs to HQ2.
At present, the company is ahead of its hiring targets.
Amazon is expecting to move ahead with some pre-construction work on PenPalace later this year, including applying for permits.
Meanwhile, Arlington County will begin its work on some adjacent utility projects, said the company.
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