Amazon HQ2 winners: New York City and Arlington, Virginia

Arlington, Virginia, and Long Island City in Queens, New York, will be the joint homes of Amazon’s second, and in this case third, headquarters.

The company plans to employ 25,000 employees at each location, according to an official post on the company’s blog, as well as open an Operations Center of Excellence in Nashville, which will bring 5,000 jobs to Music City.

“We are excited to build new headquarters in New York City and Northern Virginia,” said Jeff Bezos, founder and CEO of Amazon, in a statement. “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come. The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities.”

The unexpected decision to split the company’s second home between these two locations caps more than a year of speculation over which city would become the second home of the trillion-dollar retail giant, as well as a promised 8 million-square-foot campus, 50,000 high-paying jobs, and $5 billion in investment.

Many companies have been floated as front-runners over the last few months, including Denver (which was picked by the New York Times), New York City, Atlanta, and Chicago. As soon as a Wall Street Journal story from Monday, November 5, suggested Amazon was thinking of splitting HQ2, some analysts speculated the company would choose New York City and D.C.

In February, a small website in Arlington, Virginia, ARLnow.com, set off rumors that the D.C. area was poised to win when it found an article about the area getting significant traffic from an internal Amazon site dedicated to the headquarters search. Other reports suggested the proximity to Washington, D.C., the site of potential regulatory battles, as well as Jeff Bezos’s mansion in Kalorama, made the greater Washington area the preordained winner.

How Amazon kicked off the ‘urbanist Super Bowl’

Amazon did its best throughout the process to maximize the publicity value of the contest, which some dubbed the “urbanist Super Bowl,” as well as extract potential subsidies from local leaders. NYU marketing professor Scott Galloway likened the competition to a Hunger Games environment.

Amazon

After Amazon announced plans for a second, massive North American headquarters the equal of its presence in Seattle last September, cities scrambled to assemble bids to land Amazon, and threw themselves, and tax breaks, at the company. A total of 238 cities across Canada, Mexico, and the United States bid for HQ2, including a number of outlandish, humorous, and somewhat silly ploys to land the e-commerce titan. In January, the company announced a list of 20 finalists.

Amazon had repeatedly said the new headquarters would rival Seattle in terms of the size of the company’s footprint. Enrico Moretti, an economics professor at the University of California-Berkeley, has estimated that in addition to new Amazon employees, HQ2 could bring up to 250,000 additional indirect jobs to the winning city.

While the economic prospects have had mayors and economic development teams salivating at the possibility of new jobs and sizable investment, others have cautioned that such rapid growth comes with a cost, including new affordable housing and transportation challenges. Splitting HQ2 between two sites may minimize the impact of a single headquarters.

Alex Garland

The example of Seattle, which has seen housing costs, affordability, and transportation issues become more complicated and deeply rooted due to Amazon’s expansion in the city, has been held up as a lesson.

Seattle’s complicated relationship with the company has been a source of wealth and worry for citizens. In March, Amazon announced it would expand its Seattle real estate holdings to 14 million square feet of office space, the largest footprint of any major company in a single U.S. city. That huge presence showed itself during the city’s debate earlier this year over a head tax, which would levy a per-employee tax on large companies to fund efforts to battle homelessness. Amazon’s antipathy towards what the company considered a “tax on jobs,” and threats to pause construction over the measure, demonstrated its considerable clout. After initially passing the measure, the city council repealed it in June.

Kshama Sawant, a city councilmember, called the repeal “a cowardly betrayal of the needs of working people.”

Does one of the nation’s biggest companies need public money?

Amazon’s bid process, which specifically included subsidies as one of the deciding factors, has been criticized as an example of the problems with corporate subsidies and economic development. The company, which has a market cap of more than $1 trillion and is run by the world’s richest man, has received $1.6 billion in subsidies from 129 communities since 2000, according to the nonprofit Good Jobs First.

Many cities signed non-disclosure agreements as part of the HQ2 bidding process, meaning local boosters didn’t know what their cities would be giving away for the chance to land Amazon.

Urbanist Richard Florida helped start an online petition signed by academics and urbanists, asking city leaders to reject subsidizing HQ2, in affect, creating a “non-aggression pact” between competing metro areas. City council members in Nashville, which offered its own secretive and unsuccessful bid, passed a “Do Better” bill that will force companies to disclose information during the bidding process for public incentives.

The official Amazon announcement breaks down the subsidies for both locations, each of which will receive approximately $2.5 billion in Amazon investment and 25,000 jobs. In Long Island City, Amazon will receive $1.525 billion in performance-based direct incentives for creating 25,000 jobs, including $1.2 billion from the state’s Excelsior Program and $325 million from Empire State Development for developing real estate. The company claims that equates to $48,000 per job for 25,000 jobs with an average wage of over $150,000. Amazon estimates the city will receive $10 billion in incremental tax revenue over the next 20 years. The company has also promised to donate space on its campus for a tech incubator and a new primary or intermediate school, and will invest in infrastructure and new green spaces. There’s no mention in the agreement of helping the ailing subway or MTA.

In Arlington, Virginia, Amazon will receive $573 million in direct, performance-based incentives from the city, which includes $550 million from the Commonwealth of Virginia tied to job creation. The company will also receive a $23 million cash grant over the next 15 years based on a local hotel room tax. The Commonwealth will also invest $195 million in infrastructure, including upgrading the Crystal City and the Potomac Yards Metro stations, creating a pedestrian bridge between National Landing and the Reagan National Airport, and “improving the pedestrian experience” crossing nearby Route 1. Arlington will also steer $28 million worth of property tax revenues into a Tax Increment Financing (TIF) district for on-site infrastructure. Amazon estimates the region will see an estimated incremental tax revenue of $3.2 billion over the next two decades.

Amazon’s growing footprint

Amazon’s decision to split HQ2 between Long Island City in Queens, New York, a subway ride from Midtown Manhattan, and Arlington, Virginia, located near Washington, D.C., represents its most substantial expansion, but it’s far from its only new development. The company has demonstrated a voracious appetite for office space, distribution and logistics facilities, and warehouses; its capital expenditures are now roughly equivalent to Walmart, despite having just a handful of physical locations. New projects announced this year include tech offices in Boston and Vancouver and new fulfillment centers in Nevada, Missouri, and Michigan.

With Amazon now instantly becoming a dominant industry in these cities, this new physical presence underscores the incredible reach and power of the company. With its acquisition of Whole Foods, experiments in cashier-less retail stores, and huge appetite for industrial real estate, the company is making its impact felt in urban areas around the country. Hopefully Long Island City and Arlington can use the Amazon affect to its advantage. Many cities have used the HQ2 bidding process as a means to bring attention to shortfalls and focus on investment in infrastructure, transit, and workforce development.

Some city leaders have even felt the attention they gained from being a part of the contest has been a positive, and helped position them for future Amazon expansion, with the expectation that the company’s continued growth is all but foreordained.

“It’s not unfathomable that they may create just as many jobs again in 10 to 15 years,” says John Krueger, executive vice president of the Greater Sacramento Economic Council, which pitched a losing bid for HQ2. “Very few companies can make a credible claim to do that.”