Amazon’s move to indefinitely pause construction on the second phase of its headquarters in Arlington, Virginia, presents a major red flag to developers who have flocked to the area in recent years.

The company is delaying work, amid dipping real estate values and pressures on tech companies, on 2.8 million square feet at PenPlace, a planned four-office development that would include the eye-catching, spiral-shaped Helix building, according to Rachael Lighty, a spokesperson for Amazon. A groundbreaking was originally scheduled for early 2023, though the start date is now up in the air with the project on pause.

Builders have been drawn to the Northern Virginia neighborhood of National Landing, which has essentially materialized since 2019 when Amazon announced it would build a second headquarters there. At least 12 development projects have been completed or begun construction over the past four years in National Landing, an area that includes parts of Crystal City and Pentagon City in Arlington County and the Potomac Yard neighborhood in Alexandria.

“We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees,” John Schoettler, vice president of Amazon’s global real estate and facilities, said in a statement. “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.”

The e-commerce and tech giant said it remains committed to bringing 25,000 workers and $2.5 billion in investment by 2030, Lighty said.

The first phase of Amazon’s development, known as HQ2, is scheduled for completion this summer, and hiring is ahead of schedule at 8,000 new full-time employees in Arlington, said Lighty. Known as Metropolitan Park, phase one comprises two new office buildings spanning 2.1 million square feet.

Bloomberg News reported earlier Friday on the pause at HQ2.

Arlington County approved plans for PenPlace in April, and Amazon purchased the site, located across from Metropolitan Park, for $198 million in May 2022.

In a February interview with CoStar, Arlington County Board Chair Christian Dorsey said Amazon would have to go through the county to seek amendments or revisions to its previously entitled plans.

“We would have to look at [proposed changes] to see whether or not it made sense,” he said, adding that developers’ bullish attitudes toward National Landing have been muted slightly because of COVID-19 and economic headwinds such as inflation and interest rate hikes. So far, that’s mostly materialized as a pivot toward residential over office development, Dorsey said.

Amazon’s development partner, JBG Smith, hinted at concerns over HQ2’s development outlook in its year-end Securities and Exchange Commission filing in February. The Bethesda, Maryland-based developer, which has concentrated 70% of its real estate portfolio in National Landing, said a change in Amazon’s development plans would have negative implications for the company.

“If Amazon determines to delay construction, reduce the size of Phase II or otherwise shrink its footprint in National Landing, that could have a material adverse impact on our plans for National Landing,” the company said in its SEC filing.

The real estate firm’s stock closed down about 6% Friday following Amazon’s news.

Amazon currently leases about 1 million square feet of office space from JBG Smith in National Landing, according to an earnings report from the developer. Roughly 387,000 square feet of those leases are set to expire this year, and Amazon plans to vacate at least 300,000 square feet.

In January, Amazon began a round of job cuts affecting 18,000 people, joining a widespread workforce downsizing across the technology sector.

About a month later, CEO Andy Jassy announced all Amazon employees would be required to come into the office three days a week starting in May. Remote work policies have resulted in low office occupancy rates, with the Washington, D.C., market still stuck at about half of pre-pandemic levels. The persistent high vacancy rate has negatively affected office values, causing many owners to default on loans and making the office market a risky one for investment.

The selection of Arlington as the location for HQ2 came after a high-profile search by Amazon in 2018 that drew bids from municipalities around the country. A site in New York City was chosen at the same time, but Amazon later scrapped that location after residents had complained that too many subsidies were offered to the company and said they were concerned that Amazon was opposed to unionization.