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CRE’s Take on Amazon’s HQ2 Decision

Updated: Nov 30, 2018

After more than a year of speculation and fierce competition, Amazon has officially selected the location for its second headquarters – or, as it turned out, two locations for headquarters in Long Island City in New York City, and National Landing in Northern Virginia.




POSTED ON NOVEMBER 14, 2018  BY MARIE RUFF 


Amazon describes Long Island City, a neighborhood in Queens, as a “mixed-use community where arts and industry intersect” and cited the access to mass transit and local airports among the area’s attractions. Over the next 10 years, Amazon anticipates bringing 25,000 jobs to Long Island City with an average salary of $150,000 each (along with accompanying tax revenue). For its part, New York offered Amazon incentives of more than $1.5 billion, with some contingent on the results of Amazon’s job growth and salaries.


The Northern Virginia location, just a few miles from Washington, D.C., also provides a variety of mass transit options along with proximity to local airports. Amazon’s announcement calls the National Landing neighborhood (otherwise known as Crystal City) in Arlington County an “urban community” offering a live-work-play mix of restaurants, apartment buildings, retail and commercial offices. Amazon expects to lease 500,000 square feet of space in this area from developer JBG Smith. Another 25,000 high-paying jobs will be created in National Landing, with Amazon receiving $573 million in performance-based incentives.


We asked some of NAIOP’s Distinguished Fellows – an elite group of academic thought leaders from real estate programs at top universities – for their thoughts on the locations selected, the advantages or disadvantages or splitting HQ2 into two cities, and what lessons can be learned from the North American-wide search process.


Amazon HQ2 – Strategic and Obvious Choices

The two locations of Long Island City and Crystal City make great strategic sense for Amazon as the locations of its much-discussed HQ2. Long Island City, New York, is a developing part of Queens with multiple transit options to Manhattan and proximity to two major airports. This location will clearly attract young tech workers from the greater New York City region. Crystal City is in Northern Virginia across from the political power center of the U.S. and also strategically close to major airports. Such locations are of obvious strategic importance – in fact, it is hard to understand why Amazon made such a public spectacle of the search process. Major Northeast metros with mass transit, access to multiple airports and a highly educated workforce always seemed like an obvious desire for the Seattle-based tech/retail giant.


All may not be lost for the “losing” cities: They gained exposure, knowledge and other intangible benefits that will help them compete for future business relocations and expansions. In fact, I suspect that Amazon will use the knowledge of cities and offered incentives to open more, albeit smaller, locations across the nation. No city that lost should feel badly; the paring of these two locations is effectively impossible to match anywhere else in the U.S.


The key takeaway for commercial real estate investors and developers is that transit, particularly airports, matter. If locations were desired in the Washington, D.C., and New York City areas, it was mass transit and airport access that made the specific sites of Crystal City and Long Island City the ultimate winners. Those are undoubtedly the two features that made them so valuable to Amazon, assuming they chose the greater metro areas first.


Joshua A. Harris, Ph.D., CRE, CCIM, CAIA Academic Director and Clinical Assistant Professor of Real Estate Schack Institute of Real Estate, NYU School of Professional Studies


Amazon HQ2 – A Boon or Boondoggle?

In terms of economic development, this truly goes in the category of “elephant hunting”. I am not surprised by Amazon locating its second headquarters on the East Coast. The specific locations of Crystal City and Long Island City are a bit of a surprise but logical – very close to two of our nation’s most important and vibrant cities, but not in the middle of them.


It’s hard to comment on the business decision to split the headquarters and I can only assume there is operational logic. But, trying to amass 50,000 jobs in one place may have been seen as too difficult, physically and politically. The ability of a major, mature city to absorb that many jobs from one employer is difficult enough, but knowing that Amazon’s arrival brings many other related jobs – maybe 2.5 jobs for each Amazon job created, plus other employers who will locate near Amazon and the secondary jobs they provide – means incredible strains on public infrastructure. By splitting the HQ, they have lessened the impact to some degree.


I think the big winners are the building and property owners in the both Crystal City and Long Island City. What surprises me is that both places already have tight housing inventories and some of the highest costs of living in the U.S. Amazon’s new headquarters will exacerbate matters. Those potentially negatively impacted are residents who will see increased congestion in all services (community services like schools, health care, police, fire, transportation, etc.) and especially renters who will see rents rise due to increased demand.


Economic development is highly competitive and jurisdictions try hard to win employers. It is difficult to judge the likelihood of success. All locals should focus on building resilient, diverse, culturally integrated and interesting places. An Amazon comes along once in a blue moon; focusing on being attractive to employees will help increase the chance of winning more and better jobs in the long run.


Mark Stapp Executive Director, Master of Real Estate Development, Fred E. Taylor Professor in Real Estate, W.P. Carey School of Business, Arizona State University Tempe, Arizona

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