• Amazon is pausing construction of parts of its second headquarters, dubbed HQ2, in Virginia, the company confirmed to CNBC.
• It's pushing back the development of the second phase of HQ2, while the first phase of the campus is slated to open in June.

Amazon is pausing construction of its second headquarters, dubbed HQ2, in Virginia, the company confirmed to CNBC on Friday.

John Schoettler, Amazon's real estate head, said in a statement the company is pushing out the groundbreaking of PenPlace, the second phase of the sprawling northern Virginia campus. The first phase of the campus, known as Metropolitan Park, is expected to open on time this June and will be occupied by 8,000 employees.

The move comes as Amazon CEO Andy Jassy has taken steps to curtail expenses across the company in the face of slowing revenue and a gloomy economic outlook. That's led the company to announce the largest layoffs in its history, totaling more than 18,000 employees. Amazon is also reevaluating its real estate portfolio and sunsetting some projects.

"We're always evaluating space plans to make sure they fit our business needs and to create a great experience for employees, and since Met Park will have space to accommodate more than 14,000 employees, we've decided to shift the groundbreaking of PenPlace (the second phase of HQ2) out a bit," Schoettler said in the statement. "Our second headquarters has always been a multi-year project, and we remain committed to Arlington, Virginia, and the greater Capital Region."

The news was first reported by Bloomberg.

PenPlace encompasses three 22-story office buildings, more than 100,000 square feet of retail space and a 350-foot-tall tower, called "The Helix." The development is larger than Metropolitan Park, which sits south of PenPlace, and includes two additional, 22-story office towers, as well as a mixed-use site featuring retail, restaurants and green spaces.

Amazon selected Arlington as the site of HQ2, in addition to the Long Island City neighborhood of Queens, New York, as part of a closely watched, splashy search for a second headquarters that kicked off in 2017. The company announced in 2019 it would halt plans to build its new headquarters in New York after it faced pushback from local activists and city council leaders.

The company rapidly expanded its physical footprint and head count during the Covid pandemic as it benefited from a surge in online shopping. But it has pulled back on office expansion and the construction of new buildings in Nashville, Tennessee, and Bellevue, Washington, in recent months, citing uncertainty around the pandemic's impact on in-office work, Reuters reported.

In February, Jassy announced Amazon would require corporate staffers to spend at least three days a week in the office beginning May 1, a move that prompted backlash from some employees who said they prefer a more flexible approach to return-to-office plans.

Amazon has said it will create roughly 25,000 jobs over the next decade at HQ2 and in the surrounding area. Company spokesperson Zach Goldsztejn said that commitment remains unchanged.

Amazon expects to begin pre-construction work on other aspects of HQ2 later this year, Goldsztejn said.

Correction: In February, CEO Andy Jassy announced Amazon would require corporate staffers to spend at least three days a week in the office beginning May 1. An earlier version misstated the timing of the announcement.