Amazon pauses construction on second HQ in Virginia amid job cuts | Hacker News Reader

Amazon pauses construction on second HQ in Virginia amid job cuts

seattletimes.com

So five years after cities collectively lost their minds trying to get Bezos to like them [1], Amazon is backtracking. The original search was for just one Second HQ, then they selected two: Virginia and New York. But when New York complained about the new altered deal, Amazon backtracked from that.

I suspect this is a move to extract new concessions from Virginia government.

Corporations can't be trusted, and shouldn't be trusted, this is why contracts exist. Amazon would never sign a contract that allowed another corporation to do this to them, why should Virginia allow Amazon to abuse the Second HQ selection process?

[1] https://money.cnn.com/2017/10/04/technology/amazon-second-he...

As someone who has worked for an Amazon supplier (as in, Amazon uses our components for their data centers), they are well known to be extremely cheap and capricious. They are the worst of the big tech companies to work with

Their "leadership principles" note "Frugality" as a core trait. It's possible that may be related

But you get a door as a desk! How cool is that.

It seemed cuter when Bezos was driving one of those as opposed to a half billion dollar yacht or a penis rocket.

Another company with that reputation is Walmart. Further evidence Amazon is not really a tech company, they just like those multiples so dabble in enough tech to get them. It seems like the longest running con to me that people even see them as a tech company.

What sector would you say that AWS operates in?

I’d say their reputation as a tech company predated AWS and AWS/Kindle/Alexa were pushes to create the multiple expansion across their retail revenue which is enormous. The fake hype around drone delivery was another push to display they were innovative which they really just made a commercial.

The fact AWS ultimately was successful particularly at driving profit was luck. The core of their business and culture is still retail.

Their retail strategy and scale on the internet meant they needed technical expertise the same as how a traditional retail company needs real estate, construction, and merchandising expertise. It doesn’t make them a tech company because they utilized tech in a large scale and had the physical assets and data center expertise to launch a product like AWSes.

At the time that amzn started, they were absolutely a tech company, doing things with tech that nobody else was, in the retail realm.

I would absolutely agree that it doesn't make much sense to talk about the retail arm as a tech company any more, although it's not 100% clear cut since the company's apparent strong interest in aggressive automation may undercut that argument.

However, AWS appeared before the retail division even made a profit, and it continues to be the real revenue generator, and in this sense, regardless of the state of the retail division, it still seems fairly useful to categorize the company as a tech company.

To say AWS is luck is like to say iPhone is a luck.

Timing the market is always luck. Smart phones had been around and many failed when the iPhone succeeded. Luck often requires exceptional execution and that’s where they succeed.

Apple isn't much better. I spoke to a person in China responsible for supplying components for MacBooks and they had the same experience. Although I did learn a lot of interesting trivia about the choice of plastics and colors, one thing that did stand out is not only how cheap but also how abusive the Apple reps are.

I imagine this is standard across the board.

I have never met anyone who worked harder than people in supply chain at Apple. The leadership is very demanding of them, and it clearly trickles down

The CEO comes from the world of supply chain management, and a large part of Apple's success as a company comes from their ridiculously-well-managed supply chain.

Unsurprising that it's a stressful job — but I'm sure it's also the best training in the world for how to manage a supply chain.

> I'm sure it's also the best training in the world for how to manage a supply chain.

I wonder if it is, though - as noted, Apple is almost unique in that their size allows them to demand vast concessions from their suppliers. I wonder how much of what you'd learn still applies when you're working for a regular company and suppliers can just say no and drop you as a customer if you get to be too much of a pain?

Is true with other large orgs, e.g. Walmart and Rubbermaid.

No, Amazon is the standout worst. Even Apple will fund R&D efforts if needed. Amazon tells us to do something, makes no commitments, changes their mind, then 6mo later asks us why we don’t have it ready

They are competing with Walmart, who is similarly draconian with their suppliers. It's a tough business

Then just don’t sell them your stuff, there are bunch of Chinese suppliers I bet waiting on the line. And probably that is also part of the reason you did not see Apple as the same thing.

The first thought that came into my head was that AOC should be taking a victory lap over this. I clearly remember all the hate she got not only from the collective of right wing people but also her own party.

Sure enough after this news, she has brought it up:

"When I opposed this Amazon project coming to New York bc it was a scam of public funds, the whole power establishment came after us.

Billboards went up in Times Sq denouncing me. Powerful pols promised revenge. Op-Eds & CEOs insulted my intelligence.

In the end, we were right."

"I know I’ll never get an apology for that time, but it was worth it.

We protected NYers from a scam deal to drain public dollars from schools & infrastructure in exchange for empty promises of “Amazon jobs” w/ 0 guarantees or guardrails. Sadly, cities who took it are suffering."

[1]:https://twitter.com/AOC/status/1631706682597179405

[2]:https://twitter.com/AOC/status/1631708752737861665

which cities who "took it" are suffering exactly?

Did you read the article? We are only talking about two locations.

I can't read the article without turning off my ad blocker, but based on other comments in this thread, Virginia doesn't actually seem to be suffering because they didn't offer anything beyond standard development incentives they would offer to anyone. Those incentives are performance based, so they aren't paid if Amazon doesn't follow through.

The whole reason activists in NY made a stink about this is because these "jobs" Amazon promised were all hypothetical white collar jobs that would not benefit the existing residents at all and instead serve as a forcing function to push them out of their communities through price increases. Imagine you are a representative of the people currently living there. If you actually wanted to benefit your constituents you'd attracts jobs that your voters are actually qualified for(Maybe an Amazon warehouse which they already have). There was a massive surge in real estate purchasing and speculation in the weeks leading up the Amazon decision in NY. All AOC and the activists really did was request Amazon answer some additional questions and that was enough for them to totally flip the table and announce they are leaving. What followed what the shit show that AOC described in her tweet.

In the end those white collar jobs didn't even materialize in Virgina but they got all the downsides that NY avoided.

One of the few things I didn't entirely disagree with AOC on. Too bad she comes with a lot of baggage, so the argument she fights for the "little man" falls flat.

Nobody's perfect but most of the "baggage" originates from Tucker Carlson rather than AOC herself.

How would you or I look if we were the target of that kind of campaign?

I don't think OP was talking about that. There are a number of short-sighted policies that she supports which definitely don't hold economic water. ex. rent control expansion, extremely high % of affordable housing designation in new construction. They are popular policies but don't necessarily make a real difference to the environment.

A focus on achieving outcomes unfortunately isn't really valued in our current political system so instead of us being able to debate which policies would most effectively achieve shared goals we debate how ideologically pure the policies are, or even just reflexively reject ideas based on who delivered them.

This is a universal problem across political parties.

She appears to have very high approval ratings among her constituents. At the end of the day they are the ones who matter, not HN downvoters, not the people who criticize her or don't like her, not anyone else.

There have been moments where she has disappointed her greater base (this includes people outside her district) by not being stronger on pushing back at her own party.

It seems like a losing proposition. She is only a small handful of progressive candidates and anyone of her cohort who speak out have their reputations cemented in a negative fashion.

Just ask Ilhan Omar: Among the many right wing attacks against her are stupid things like her supposedly marrying her brother and on the left wing she is constantly attacked for being anti-semitic despite raising obvious points on the corruption of the Israel lobby. AOC, Ilhan, and the squad are used by the Democratic party when it suits them but at the same time all their bills are quickly killed so whats the point?

There has been so many decades of left wing apathy that every single entity that musters up any little bit of courage to fight the right wing using their own tactics are quickly branded as a dangerous being and that negative emotion is permanently sewn into people heads.

It's worth noting that Virginia was unusual in that it didn't really offer any specific concessions to Amazon. Most jurisdictions have some sort of standard incentive program for business investment (https://www.vedp.org/incentives is I believe the relevant stuff here), and compared to other cities, the Arlington bid was extremely stingy (note that it's not one of the examples in your article).

My belief is that the VA site was preselected before the HQ2 process begin, and the process was primarily an attempt to extract as much concessions as possible by creating a very public competition.

You're saying that the process failed, then?

Yes, that is my belief.

They did get some small non-standard incentives from Arlington County in the form of giving Amazon 15% of hotel taxes that the county collected above the baseline amount that was projected without HQ2.

That was projected to be $23 million (the standard state incentives were projected to be $750 million), but they will most likely never receive a dime because hotel stays have dropped significantly below the baseline set when the deal was made.

I remember everyone here was shitting on "woke" New York for not bending down to Amazon's demands and ultimately driving them out. Turns out the city didn't crumble into ruin, and it was the correct decision after all.

If it was the correct choice, NYC decision-makers made it correctly merely by accident. Not a single person in 2017 was cleverly predicting the insane knock-on effects of COVID with respect to commercial real estate prices, over-hiring, or the subsequent layoffs.

But it's not at all clear it was correct. Amazon originally said they planned to hire 25,000 people over 10 years. The article says they already hired 8,000 people and are pausing some expansion of construction on one of two sites. They currently have capacity built for 14,000 people. As the article mentions, they are still ahead of their original schedule, despite everything that's happened since then.

That doesn't seem like a very big deal and still a big net win for jobs in the area. The people shitting on woke New York for fumbling the ball are still substantially right: DC is getting those jobs and NYC is not.

Hard to imagine that the US is not massively over-supplied with office space right now, given that some double digit percentage of workers will never go back to an office.

Every office space construction project right now is either paused or being driven forward by the sunk cost fallacy.

I was in New York last week and couldn't believe how much office space is just completely deserted when looking out of my hotel window.

Still the most expensive office space in the country (https://www.timeout.com/newyork/news/manhattan-office-space-...). Even though there is significantly more vacancy in Manhattan today than pre-2020, rents have barely gone down.

From what I hear, it's hard to reduce rents significantly as they're part of the financing arrangements with banks. Rents in general seems to be really sticky.

Commercial spaces have this huge disconnect between occupancy and utilization. Just because nobody is there, it doesn't mean it's not occupied. And rents only ever fall when occupancy stays low for long periods.

So, well, wait a few more years before being surprised.

Hard to imagine that the US is not massively over-supplied with office space right now

Easy to imagine, since it's been in every newspaper almost every single day for the last two years. Last i checked, SFO had something like 30% office occupancy rate.

Where i live, landlords are paying the few remaining tenants in some skyscrapers to move into other skyscrapers to concentrate the remaining offices in fewer buildings so that the other towers can be shut down and mothballed, or turned into apartments.

I agree we are over supplied with office space.

I do doubt there are many available locations for 25,000 workers in Arlington. This is an indicator that Amazon is unsure about the amount of office space it will need near the capitol, not that they think they can get a better deal with a pre-existing building. Maybe it doubts that it will need as many workers as previously thought. Maybe it questions if they need as much space for the same number of workers. Maybe it is second guessing the value of condensing workers in large hubs.

My guess is that they recently lowered their internal projections for the size of future federal government contracts. Pubic sentiment has lowered since '18, and politicians might be more sensitive to awarding them contracts.

This is very true. Relative is currently converting 4 story office building into apartments. Weirdly enough much of the space has been vacant since around 2018-2019. Not sure how much it has to do with the area but I think small businesses in general have started to lean away from office space as technology has gotten better.

Curious timing when they just announced Return to Office plans

But not yet announced next layoff waves.

Right - part of their leadership wants to to RTO now! The other part says "wait! offices are too expensive and even H2 isn't safe. Wacky world we're in.

It's like that headline about Google making employees share desks. Seems like they are hell-bent on doing "worst of both worlds" hybrid instead of "best of both worlds" hybrid.

These decisions were made by the same people. They are opening up buildings with 14,000 seats in June in a city where they have 8,000 employees. There may be issues in May, finding desks for people won’t be an issue a month later.

Trying to keep their current RE portfolio value propped up while they simultaneously divest as fast and as quietly as possible out of commercial RE.

I'm sure they'll keep their tax benefits they got for selecting Virginia.

Most of the tax benefits are performance-based and only kick in if Amazon meets certain thresholds for job creation, increases in local hotel stays, and total office space square footage used.

https://www.washingtonpost.com/dc-md-va/2022/09/02/arlington...

Well, my pessimism got the best of me. I'm guessing states are getting wise to these sorts of things and putting making the incentives performance based now which is encouraging!

Incentives have always largely been performance-based, I believe, but the cases you really hear about are the ones where the jurisdictions are desperate for the investment, and that desperation may make them extremely willing to renegotiate incentives to keep the company from picking up and moving.

The most notable case in recent memory of outlandish incentives is the Foxconn plant in WI, where the original incentives were not paid out as Foxconn failed to meet even the lowest tranche of requisite investment. Wisconsin refused to pay, but this intersected with political sniping (as the Republicans, voted out of office, criticized the new Democratic administration for not paying up). The contract appears to have been renegotiated back to "normal" levels of incentives, which have been paid out as Foxconn has met those levels of investment.

not true

Those are contingent on Amazon actually following thru with their investment

Virginia didn't offer them much, except Arlington County, which through a few hotel tax breaks at them.

VA got the nod because it's right outside of DC and the Pentagon. AWS wants that GovCloud money, and Bezos wants to be near the Washington Post / Congressmen. And for that reason VA didn't have to pander too hard.

Virginia is awful (imo, as someone living there but moving ASAP)

It seems to somehow have all the cons of any sort of area, without hardly any of the pros. The traffic is also consistently, comically bad. Everything feels so damn crowded because there is pretty much only one road to go North and South and everything was built seemingly 100 years ago. Not an area ever intended to house this many people. Also, you pay some of the highest prices in the country for housing. Not sure how people do it for so long.

Come on, Northern Virginia housing market crash!

Never going to happen. Unless somehow government became smaller and the people desiring access became fewer.

The housing market here is very robust due to many jobs being linked to the government, often in groups which never see significant budget cuts. I anticipate a bit more deflation of property values, but not a crash.

HQ2-proximate properties will probably not be able to maintain their asking price, but I'm guessing property owners will do the NoVA thing of sitting on overpriced property long enough to try to squeeze as much out of it as they can.

That's not "the NoVA thing", really. It is a fact of life when you have 30-year fixed-rate mortgages.

Rates are up. Buyers don't want to buy at the same prices with the new rates. Sellers don't want to sell at the lower prices. What you have is a drop in liquidity.

It is a NoVA thing. The '07/08/09 recession had minimal impact on the DC area housing market compared to the rest of the country. It peaked and fell like the rest but the fall wasn't as bad and the recovery was far quicker. The federal government and its related commercial contractors are the main ingredient in that.

I bought a house in DC in 2006 and my home's value never really fell, it just went flat for a year or two. Very different from the overheated markets like Las Vegas that lost 30%+ and took years to recover. There were a lot of foreclosures in my neighborhood in 07/08, but that didn't crash prices, it just boosted the volume of sales.

Not saying you're lying but DC home prices overall are down 14.7% YoY, and may have only just begun.

https://www.redfin.com/city/12839/DC/Washington-DC/housing-m...

Good. The pandemic price bubble could not last, and it outpaced wage growth quite a bit. As a property owner, I fully expect property values to slowly deflate to reality, however that's still going to be higher than they were pre-pandemic, and eventually slowly increasing again.

Meanwhile: Arlington, VA (where HQ2 is) says +1.1% YoY. Some wild volatility on those charts from the past year...

https://www.redfin.com/city/21282/VA/Arlington/housing-marke...

A drop in median sale price doesn't necessarily mean that the price for a specific house dropped that much. Some of that is probably just people holding off on buying or selling higher-end houses.

I was completely ignorant of the scale of the 08 recession partially due to being in my NoVA bubble. To be sure, part of that was definitely me: I didn't even think much of the fact that a friend was able to pick up a townhome that was foreclosed on for cheap. However it was definitely business as usual in the contracting world.

20 years of DoD led wars -- and another uptick because of Ukraine and supplying them -- means that there is a lot of $$$ for NoVA tech workers.

Like, the recession happened... but Iraq or Afghanistan didn't stop...

"It's different here". You'll hear that across much of the country.

I am likewise convinced, and always have been, that Google's downtown San Jose campus will never be fully built

All of these tech companies are overinvested in real estate

Every single company that owns commercial office space is currently overinvested.

Prior to the pandemic, these companies were doubling headcount every 6 years.

Unless their growth rates sink a lot lower than pre-pandemic growth, they'll grow into that space in 10 years.

"Disco Stu: Didn't you know that Disco record sales were up 400% for the year ending 1976? If these trends continue, eyyy!"

Good thing I invested in pumpkins!

This place is gonna smell classy all week.

Amazon and Google and MSFT and Apple were doing that through 2 recessions over 15+ years.

Eventually it'll come to an end.

But not sure why you're so certain the end is now.

I'm not saying it is but everyone has survivorship bias. Kodak and other titans of industry of yesteryear also had their large campuses and projected growth too.

My point is that nobody can predict the future and nothing is guaranteed. Surviving isn't even the norm. We're down to about 50 companies from the original Fortune 500.

Very much so.

I work for one of the largest health care companies in the country. About 20 years ago, they started buying up the office buildings they were putting their employees in. Made sense in a lot of ways.

Then COVID hit.

In the post-COVID era, they've sold at least four of their buildings, two are sitting completely empty and still on the market and they've consolidated a majority of the employees (in my state at least) into three or four newer buildings. I've heard rumors over the next few years, more consolidation is in the works as they sell off most of their holdings.

> they've sold at least four of their buildings, two are sitting completely empty

Numbers like that don't mean anything unless you provide the proper context. How many buildings? How big are they? Where are they located?

I wonder which company that is. In my area, a local health insurance company is somewhat well known for remaining "non-profit" by directing a lot of their extra money into local real estate, much of it commercial buildings downtown. Seemed clever years ago, but hopefully they're feeling some pain now.

In contrast, REI’s management is looking pretty smart for a move that a lot of people questioned at the time.

https://www.outsideonline.com/outdoor-gear/gear-news/rei-sel...

Thanks for this info. I love REI and am one of their members but had no idea this happened. Sometimes biting the bullet is the wise decision.

MEC, which used to be Canada's equivalent of REI, went bankrupt a couple of years ago (the C used to be co-op, currently stands for company after they got rescued by a fund). Talking with a long-time employee, a big reason was ~100M spent on big fancy headquarters (new owners promptly sold them to EA)

EA are leasing it, they didn't buy it.

For San Jose's sake I hope it's not completely abandoned. But the combination of the failure of RTO and interest rates rising above zero is going to be pretty hard on commercial real estate developers for quite a while.

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