So Utopian, So … 2019

The sound of life in Crystal City today is that of construction, the rumbling of heavy trucks and the din of jackhammers. It is here, in a neighborhood in Arlington, Virginia, where thousands of Amazon workers will report to new offices a year from now. At least that is the plan.

Amazon's HQ2, with the first phase scheduled to finish next year, seemed to be almost a savior for a city that had been battling high office vacancy rates for more than a decade. Before HQ2, residents believed their property taxes might increase to fund the revitalization for struggling commercial areas.

The plan was to construct beautiful office towers and fill them with highly paid tech workers in hopes that they would juice the tax base and energize the vibe of Crystal City. The intention: build a white-collar 21st-century paradise with interlacing parks and child care centers.

"It sounds so utopian, so ideal, so … 2019," writes Anna Kramer for the tech website Protocol.

Meanwhile, Amazon is the latest major tech firm to slash its headcount in 2022.?The company plans to lay off as many as 10,000 workers across divisions, including devices, retail, and human resources, The New York Times first reported. Layoffs have already begun, and CEO Andy Jassy said in a note to employees that they'll extend into next year.

The layoffs put into question what kind of impact they might have on HQ2 in Crystal City. For the time being, it appears it will not affect the progress for the first phase of HQ2.

“We have hired more than 5,000 corporate and tech roles at HQ2 to date and there is no impact to HQ2’s phase 1 (Met Park) which is on track to open in 2023,” an Amazon spokesperson said.

In order to receive more than $550 million of incentives, Amazon pledged to create 25,000 jobs in Arlington. My take: I would be very surprised if that number of jobs ever happens there.

Amazon’s HQ2 has become a test case for what happens when your timing just couldn’t be worse. The Covid-19 pandemic turned the world on its head and the ramifications will be felt for decades. The reality is that planning for millions of square feet of office space in today's environment makes little sense.

And while more office workers are back at their desks than a year ago, attendance at office buildings in New York, Boston, Atlanta, San Francisco and other cities is languishing well below pre-pandemic levels.

Companies are now opting for smaller offices, and more space is expected to hit the market in the coming months as other tech companies like Meta, Salesforce and Lyft lay off workers. More than 100,000 technology workers have lost their jobs this year, according to Layoffs.fyi, a site that tracks job cuts.

The value of U.S. office buildings could plunge 39 percent, or $454 billion, in the coming years, according to a recent study by business professors at Columbia and New York University.

As part of the financial incentive agreement between Arlington County and Amazon, the county is to supposed to pay Amazon an estimated $23 million by 2035 in return for Amazon eventually occupying more than 6 million square feet of space.

That approximate number?was based?on anticipated hotel revenue resulting from the tech giant’s presence.?So far, Arlington hasn’t paid a dime because the hoped-for hotel visitors haven’t materialized. Indeed, no cash grants have yet been paid out to Amazon for its $2.5 billion capital investment in Arlington.

“Largely because of the pandemic, that expected growth hasn’t happened, and so that means the incentives aren’t happening either,” County Board Chair Katie Cristol told?The Washington Post.

Meanwhile, the company line is that all will be well in Arlington.

“Since we announced Arlington as the site for HQ2 nearly four years ago, we’ve made strong progress on our hiring and development plans, and are only just beginning to see the economic and community benefits of our investments,” Holly Sullivan, Amazon’s vice president of worldwide economic development, said in a statement.

What can be said is that Arlington's status as a hub for large tech companies has been boosted since the HQ2 announcement. Defense and aerospace heavyweights Raytheon?and Boeing have since announced that they would be relocating their headquarters to Arlington.

This is the lead story in our latest edition of The Rising Tide, our weekly newsletter for economic developers and business people. To read the full, unabridged edition, seven stories in all, become a Tide Insider and subscribe at?BBA?or on?Substack.

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