Online retailer Amazon is expected to open the initial stage of its high-profile second headquarters, known as HQ2, on schedule this year in Northern Virginia at a time when other tech giants are laying off thousands of employees and shedding office space around the country.
The initial stage of the megadevelopment near the nation’s capital is on track, with a state agency saying construction and hiring largely on pace after three economically challenging years that have seen job cuts by firms including Google, Microsoft and even Amazon itself.
Phase one of HQ2 is still scheduled to debut in the summer of 2023, according to Suzanne Clark, managing director of communications for the Virginia Economic Development Partnership. Amazon has hired more than 5,000 employees who work at Amazon’s leased office space in HQ2’s neighborhood. That’s about 10% of the way to its goal of 25,000 new jobs by 2030.
The Virginia partnership serves as a liaison between private companies and municipalities to encourage economic growth. Seattle-based Amazon confirmed the job numbers but declined to comment further to CoStar News, and has told other media outlets it plans to share the formal HQ2 opening date and updates in coming months.
The steady pace contrasts with Google’s announcement Thursday that it expects to take a $500 million hit in the first quarter to shrink its vast office footprint. Microsoft, meanwhile, has reportedly stopped work on a 90-acre campus in Atlanta that was intended to attract jobs and become a hub in the area.
The Amazon project in Arlington, Virginia, has already attracted a host of developers looking to capitalize on an expected surge of new workers and residents. Even so, plans could change rapidly with the tech industry adjusting both to slowing demand from the surge seen during the pandemic and economic uncertainty related to rising interest rates and inflation.
Arlington won the highly sought-after bid for HQ2 in November 2018, and work began just months before COVID-19 struck in March 2020, quickly disrupting office real estate, a major segment of the project’s focus.
Still, Amazon, the VEDP and Arlington County have yet to make any major changes to the headquarters plans, which call for roughly 5 million square feet of office space to be added to Crystal City and Pentagon City, two neighborhoods where office vacancies have increased across the board.
In Pentagon City, office vacancies have risen from less than 5% before COVID-19 to more than 38% three years into the pandemic, CoStar data shows. Crystal City’s vacancy rate hasn’t gone up quite as high, but it’s still about 10 percentage points above its historical average of 14%.
These vacancy increases have come without much inventory growth, as most of the planned offices in the neighborhood have not yet opened.
Crystal City and Pentagon City, as well as Potomac Yard in Alexandria, were grouped together into a newly branded, 150-acre district called National Landing when Amazon announced its selection of a location.
Vacancies for National Landing apartments, a key component to creating the work, live, play district envisioned, have risen slightly, from 7% to 8% over the course of the pandemic, the data shows.
The market added 310 new units over the past year, which contributes significantly to its supply and threatens to push vacancy rates higher unless it can attract an equally large demand.
Metropolitan Park is both an office park and a real park. It comprises a 2.1 million-square-foot mixed-use development that’s expected to include two 22-story office towers to house Amazon’s main headquarters on the East Coast.
There is also 65,000 square feet of retail and a half-acre of public space planned to be added to an existing 2-acre park.
JBG Smith, a developer based in Bethesda, Maryland, is acting as Amazon’s development consultant for both phases of HQ2 and is also building several satellite projects throughout National Landing.
The office park is set to open this summer. Located on the northeast end of National Landing, Metropolitan Park is the center of the most development in HQ2. The address is 1400 South Eads St. and 501 15th St. in Arlington.
PenPlace is planned to span 2.8 million square feet across four buildings. That includes three 22-story office buildings with ground-floor retail and the storied Helix, a spiral-shaped office building that planners say could double as a destination.
The Helix, based off the double-helix design of the biological DNA code, features a walkable ramp with landscaped terrain wrapping around the building. At 350 feet, the Helix would be in the top five tallest buildings in Arlington. It also would become a visible part of the surrounding skyline, with D.C.’s tallest building standing at 329 feet.
The Helix would also have aspects that are open to the public, including walkable paths, collaborative workspaces and an artist-in-residence program.
Along with the office buildings, the approved proposal includes 2.5 acres of public space with retail pavilions.
The project was approved by Arlington County in April 2022. A delivery date has not been released. It’s located on a roughly 11-acre site at the intersection of South Eads and 12th Streets, about a block north of Metropolitan Park.
In addition to developing new properties, Amazon leases another 1 million square feet of existing office space in Crystal City as of 2021, according to Arlington’s economic development website. It plans to expand its office leasing in the neighborhood to at least 4 million square feet by 2031, according to Arlington’s economic development website.
Here are some major projects that are completed or underway in National Landing:
- The Witmer is a 440-unit apartment complex completed in 2019. It was developed and is still owned by New York-based Kimco Realty.
- The Clark is a 342-unit apartment complex with ground-floor retail completed in 2020.
- The Sur is a 360-unit apartment complex with 17,000 square feet of retail completed in 2020.
- Central District comprises an 84,000-square-foot retail space with an Alamo Drafthouse movie theater and Amazon Fresh grocery store. It was developed by JBG Smith and opened in spring 2020. Its second phase, which was going to be an office-to-retail redevelopment, was withdrawn, according to Arlington’s Planning Board.
- 1770 Crystal Drive is a 271,500-square-foot office leased almost in full to Amazon. Built in 1979, the office was renovated in 2020 when Amazon began leasing there.
The Sage is a 306-unit property with 10,600 square feet of retail. It was completed by New York-based LCOR and began leasing in October.
- The Milton is an 11-story building with 253 units and about 15,500 square feet of retail. It’s developed by Kimco and scheduled to open this year.
- 2000-2001 South Bell St. is a two-tower residential and retail complex totaling 775 apartments and 27,000 square feet of ground-floor retail, with some below-grade parking. It was developed by JBG Smith and broke ground in January 2022.
- Century Center Tower is a redevelopment project proposed by MRP Realty and LaSalle Investment Management. The developer pair is renovating and modernizing two 1970s-era offices towers and adding a walkable pedestrian plaza and 56,000 square feet of retail. The complex is being rebranded to Crystal & Clark and has attracted a 120,000-square-foot lease from aerospace firm Raytheon, which announced it would move its global headquarters there in June. The renovation is set to wrap up in spring 2023.
- The Hazel and Azure is a two-phase development that would include 491 residential units and some ground-floor retail. It’s under development by Florida-based ZOM Living, which has offices in Northern Virginia, and it’s expected to open in 2024.
- 1900 Crystal Drive is a two-tower, 808-unit residential building with 47,600 square feet of retail. It’s being developed by JBG Smith and is set to open in 2024.
- The Crystal House development is an expansion project by Washington Housing Conservancy, which was co-founded by JBG Smith. In 2020, WHC acquired the 828-unit Crystal House apartments to preserve the existing affordable housing at the site, and Amazon bought the $40 million development rights the following summer and donated them to the county. In January, Arlington County selected Arlington Partnership for Affordable Housing and D.C.-based developer EYA to construct an additional 844 units on the site, 655 of which will be affordable.
At least 18 other properties are proposed across National Landing, including office, residential, retail, parks and transportation projects, according to the National Landing Business Improvement District.
Included in those projects is a 131,000-square-foot office building for Boeing, which announced in May it would move its headquarters from Chicago to Arlington. In May of this year, the Potomac Yard Metro station is scheduled to open on the southern edge of National Landing along D.C.’s Blue and Yellow lines between the Reagan Airport and Braddock Road stops.
Just south of National Landing, Virginia Tech is constructing its Innovation Campus, which it announced in November 2018 as part of the state’s bid to attract Amazon’s HQ2.
Construction began in 2021 on a $1 billion, 11-story academic building that’s the main anchor of the campus and set to open in 2024. Virginia Tech is also hoping to hire 50 new faculty members and add 750 graduate students to its annual enrollment by 2030.
In January, Amazon doubled down on its investment in Virginia, announcing its cloud services branch, Amazon Web Services, would invest $35 billion in data center developments throughout the northern region of the state.
AWS has already been a sizable builder and tenant of data centers in Northern Virginia, which has the nation’s largest data center market by square footage. But this investment will add 1,000 new jobs to the existing 3,500 AWS employees that now work in the region.