The Search For Amazon HQ2 Is Over. Now Comes The Hard Part

Now that Amazon has selected Crystal City in Arlington, Virginia, and Long Island City in Queens, New York, as the winners of HQ2, the real work will begin — and much of that burden does not fall on the tech giant. 

After 14 months in pursuit of Amazon's massive campus and nearly $3B in economic incentives, city and state officials in the winning cities are now faced with a grueling task: to ensure there is enough housing at an affordable price to accommodate existing residents, new Amazon hires and the rash of companies and families that will migrate to the area in hopes of capitalizing on Amazon's presence.

Add to that list growing concerns about the state of aging infrastructure and transit systems in the winning cities, plus grass-roots frustration and opposition to the Amazon deal, and it is a full plate.

A flood of residential and commercial development is expected to hit Arlington and Queens — Amazon will occupy 4M SF and invest $2.5B in each market within a 10-year period — in a building boom that will likely cause housing costs to spike.

In Northern Virginia, Amazon dubbed its future Arlington campus “National Landing,” and will bring in 25,000 high-paid tech workers over a period of time, beginning with 400 employees occupying office space in 2019. 

“I think the big issue, once it starts to sink in, is housing and how we’re going to provide enough housing quickly enough and at a price point where not just the Amazonians can afford it," Urban Land Institute Washington Chair Yolanda Cole told Bisnow. "There is concern that [if] housing supply is kept too tight, prices will rise. That will be hard on people already living in Arlington."

Washington, D.C.’s housing supply has not kept pace with population growth of late, driving housing costs and increasing affordability challenges for low-income households, according to an Urban Institute study conducted in October. DC’s population increased from 4.8 million residents in 2000 to 6.2 million in 2017. Not factoring in HQ2, the Metropolitan Washington Council of Governments estimates the metro must build 235,000 new units by 2025 to keep pace with housing demand — add 25,000 new employees to the area and that number increases by more than 15,000 units. 

A lengthy and costly entitlement process in D.C. coupled with a lack of community engagement is exacerbating those supply-demand concerns, Cole said. 

“We’re looking at our slice of that equation and seeing how we can change, simplify and make those entitlement processes more predictable, less costly, faster — but also we have to take into account the community. We can’t just railroad this through,” she said.

Most HQ2 employees are expected to spread around the Washington region for housing, the Stephen S. Fuller Institute estimates in a recent report. 

“Overall, HQ2 would increase the demand for housing in the Washington region. However, this demand would be relatively dispersed in the region and occur gradually, allowing jurisdictions to plan for the increase or adjust their current plans as needed,” the report states.

In Long Island City, Amazon will move into the 1.4M SF One Court Square tower first — New York firm Savanna announced Tuesday it inked a deal with Amazon for 1M SF.

The multifamily market in LIC is strong and developments in the pipeline could be enough to accommodate the influx of Amazon workers, data from Yardi Matrix shows. There are 15,800 units in the neighborhood — they are roughly 98% occupied, with average rents of $3,751/month. New supply underway consists of 8,651 units in 17 projects; an additional 3,425 units are in the planned stage and 15,528 units are in the prospective stage.

“If the prospective units are built, there should be ample supply of housing to accommodate Amazon,” Yardi Matrix Vice President Jeff Adler said in an email. 

Though rental unit count may prove to be a non-issue, Lease Buyout Advisors founder Ben Landy said soaring New York City housing costs will be exacerbated in Long Island City as a result of Amazon. 

“With Amazon's move into LIC, prices of real estate in LIC will increase. There is lots of money on the sidelines waiting to be deployed into real estate, and now there is somewhere to put it with huge upsides,” Landy said. “Units around the new headquarters will increase the most, and have a domino effect in the surrounding areas — especially in areas with easy public transportation options to LIC.”

Infrastructure Woes

New York and Virginia have agreed to provide Amazon with nearly $3B in combined economic incentives. New York will dish out $1.7B in “performance based” incentives, $1.2B of which will be tax credits that are contingent on Amazon fulfilling its commitment to bring 25,000 jobs to the area. From Virginia, Amazon will receive more than $570M in incentives, which includes a cash grant of $550M. Each HQ2 site will also try to accommodate a helipad. 

Public outcry in New York City regarding the winning ticket has been piercing, with many criticizing city officials for the robust incentive package offered to Amazon while the city’s subway infrastructure is crumbling. The city’s public transit system has been fraught with delays and congestion. The New York City Transit Authority unveiled a $37B plan in May to overhaul the current system, which would include 650 new subway cars, 2,800 new buses and 50 new elevators in stations — and that’s just Phase 1. 

“New Yorkers have real unmet needs from their government. Our subways are crumbling, our children lack school seats, and too many of our neighbors lack adequate health care. It is unfathomable that we would sign a $3B check to Amazon in the face of these challenges,” state Sen. Michael Gianaris and City Council member Jimmy Van Bramer said Tuesday in a statement. 

During a press conference Tuesday, New York City Mayor Bill de Blasio attempted to assuage the public’s concerns regarding transportation and congestion in Long Island City.

“We have to address the transportation needs of LIC, there’s no question. We have to look at every conceivable way to improve and increase the amount of mass transit available. There are some real interesting options,” de Blasio said, adding that the city is looking to create a new Long Island Rail Road stop, in addition to putting a shuttle bus in place to provide greater ferry access to residents in the community. 

“By the way, Amazon or no Amazon, this is something we have to address in the long haul,” de Blasio said.