Amazon HQ2 opens to high expectations

PublishedJune 15, 2023byKatherine Schulte

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.

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.

“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.”

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.

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.

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.”

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