Mixed Reactions to HQ2
“New York is not for sale,” chanted over 100 protestors outside of New York City Hall this past December. Protestors held snappy signs and Amazon boxes on which they had inverted the “smiling” arrow in the company’s logo to form a frown. Steady rain did not deter the protestors. They continued to show their strong disapproval for the e-commerce giant’s proposal to locate half of its split second headquarters along the East River waterfront in the Borough of Queens.
Amazon began its search for a second headquarters, dubbed “HQ2”, on September 7, 2017. In released documents, Amazon laid out its preferences for a large metropolitan area with technical talent and real estate options to accompany its existing Seattle base. Amazon planned to invest five billion dollars in the winning city. Nearly four months later, in early January 2018, Amazon narrowed its search to 20 cities that included Columbus, Ohio, Nashville, Tennessee, and Pittsburgh, Pennsylvania. Amazon executives then took lavish trips to each city to receive pitches and deliberate with local officials, university professors, and developers who all sought to impress. Each city offered the executives unique experiences, such as dessert tower displays and a water taxi ride in Boston. The details and cost of these trips, however, were shrouded in secrecy at Amazon’s request to avoid public scrutiny.
After a year-plus-long spectacle, on November 13, 2018, Amazon announced it would split its second headquarters between Long Island City, NY, and Crystal City in Arlington, VA. A regional operations facility will also open up in Nashville, TN.
The New York City plan included over three billion dollars in tax breaks for the company. Both New York City Mayor Bill De Blasio and New York Governor Andrew Cuomo repeatedly defended the deal that promised 25,000 jobs for the city.
Local officials in New York City, however, have echoed protestors’ disapproval of the deal. City Councilman Jimmy Van Bramer and Deputy Majority Leader of the New York State Senate Michael Gianaris, who both represent the affected area, have led the charge against the deal. Representative Alexandria Ocasio-Cortez (D-NY), who represents neighboring parts of Queens, has also been an outspoken opponent, bringing public attention to the anti-Amazon movement. Some discontent is caused by part of the deal that allows Amazon to override local zoning laws. Critics of the deal are also worried about the possible strain that new employees moving in will put on New York City’s deteriorating public transportation systems and crowded real estate market, which is marked by rent control and diminishing affordable housing. The New York deal—in part a non-disclosure agreement—lacks transparency and has angered many residents. The city promised Amazon three billion dollars in tax breaks without community input.
But the proposed Northern Virginia counterpart to Amazon’s New York City campus has made fewer headlines. There has been far less public outcry from local residents and officials. While residents of Queens would prefer not to welcome Amazon, Virginia feels more prepared to do so. Opinion polls show that approval for the plan in Arlington is at 68 percent, about ten percentage points higher than in New York City.
Northern Virginia has long been familiar with tech companies.
“The Northern Virginia region supports lots of tech companies,” explained Sanjeev Setia, the chair of the Department of Computer Science at George Mason University, in a conversation with The Politic. “Even before Amazon, it was already a place with a lot of tech companies. Most of these cater to both the Department of Defense and federal government next door.” This reputation helps attract more technological expertise every year. Tech companies in the region include growing software companies like Appian and aerospace firm General Dynamics.
Arlington County Board member Christian Dorsey emphasized that technical talent made the area attractive to Amazon. “They believe the talent they would seek in staffing up a corporation headquarters expansion is either already in this area or would be attracted to living in this area. Fundamentally, they look at talent pipelines and see that they are not going to have to work as hard to recruit,” Dorsey told The Politic.
The Northern Virginia and D.C. area also houses numerous institutions of higher education from which Amazon can recruit graduates. As part of the deal, several schools plan to expand operations in Arlington, particularly in computing, with the help of federal funding.
“Higher education wasn’t formally part of the incentives offered, but Virginia has promised to invest in computing programs at its universities over the next decade,” said Setia. “It must’ve been part of their pitch.”
George Mason University is currently growing its Arlington campus to promote computing research and inter-school collaboration. A new Institute for Digital Innovation and School of Computing headline the expansion. Virginia Tech plans to build a billion dollar, million square foot Innovation Campus within blocks of Amazon’s new headquarters. For students like Smritee Thapa, a first-year at Virginia Tech, these investments can be particularly influential.
“A lot of Virginia Tech students are from Northern Virginia already so HQ2 and the Innovation Campus open up possibilities for those students to go to graduate school or work nearby,” Thapa told The Politic. “Overall, I’m excited to see how this plays out over the next few years.”
It is likely that the region’s transportation infrastructure was also a significant factor in Amazon’s decision.
“We are made up by some of the most transit-rich corridors on the Eastern seaboard. We have Metro rail, bus, a bus rapid transit system, heavy rail including Amtrak, and an international airport,” said Katie Cristol, 2018 chairman of the Arlington County Board, to The Politic.
With these modes of transport, potential Amazon employees in Northern Virginia can avoid commutes by car, thereby minimizing concerns about increased traffic and congestion. Public transit could connect the proposed headquarters to nearby communities in Northern Virginia, the District of Columbia, and suburban Maryland. Pending improvements to local infrastructure include a pedestrian bridge across the George Washington Memorial Parkway, which will connect the new Amazon campus to Reagan International Airport. Therefore, employees can easily catch flights, particularly flights to Seattle.
While the Northern Virginia transportation infrastructure is strong, current conditions in New York City have been deteriorating. Recently, in June 2018, Governor Cuomo declared a state of emergency for New York City’s subway system following derailments and soaring delays. Many have questioned if the system can absorb Amazon workers.
The package deal that Arlington County provided Amazon is substantially different from New York City’s in its incentive structure. While the New York City deal essentially guarantees about three billion dollars in tax breaks to Amazon, the Arlington deal is performance-based.
“Especially compared to New York, at least for locality of Arlington, there is not a lot of exchange of resources happening,” said Cristol. “It becomes more a question of, ‘A new corporate tenant is coming, so how do we plan to absorb that growth and mitigate the impacts and maximize the benefits?’ rather than, ‘What are the terms of the deal on the table?
For that reason, it’s a longer-term discussion that is less heated, as people feel less like they are being sold-out as there’s not a lot of selling happening.”
In New York City, local officials were not involved in formulating the Amazon deal, and many of them are now critics of the deal. The Arlington deal, however, was drawn up through the cooperative efforts of state and local officials.
“It has been a team effort. One of the undersung stakeholder groups that been driving this deal is our economic development staff, both Arlington County and the state’s, along with the local officials, state elected officials, and the governor” said Cristol.
The cooperation of many local officials was key to ensuring Amazon’s future benefits in the region.
The Amazon deal also helps fill several holes in the Arlington economy, including holes in the tax base caused by vacancies in the local commercial real estate market. The federal government policy of Base Realignment and Closure (BRAC), a cost-cutting program initiated by the federal government in the first quarter of 2012, led to 820,462 square feet of occupancy loss alone. BRAC is a post-Cold War federal program that seeks increased efficiency by closing excess military installations and realigning remaining assets, including office space. In 2012, Crystal City’s commercial real estate was hit particularly hard by these closures.
“We’ve lost about 37,000 employees in Arlington over the last decade. So we’ve had the challenging constraints of either having to cut services or raise residential taxes. We’re looking forward to being able to welcome the new tax base,” said Cristol.
Amazon will simply fill the numerous vacancies in Crystal City. The entrance of Amazon could also bring stability to a local economy that is largely dependent on federal contracts. About 30 percent of those employed in Arlington County work directly for some level of government, and many more work with the government through other means. This leaves the region extremely vulnerable to government shutdowns and other sudden changes in federal policies.
“What we won’t have is the dynamic where Amazon comes and other existing businesses are forced out. Really, what we’re trying to do is manage any impacts on residential side… that’s our biggest problem” said Dorsey.
Providing affordable housing and preventing gentrification have been the greatest concerns with the Amazon deal in both New York City and Northern Virginia. Many locals fear being priced out of their own homes due to the arrival of new executives working high-paying jobs. Those familiar with the deal are also concerned that Amazon’s arrival could spike income inequality.
In its current state, the Northern Virginia real estate is extremely competitive for those looking to move in. For those looking to sell, it’s a strong market. A limited availability of property on the market will probably lead to higher market prices for homes. This could force out those who cannot afford this higher pricing, especially when price increases are exacerbated by Amazon’s arrival. Rising prices can be partially attributed to the region’s failure over the past few decades to add enough housing supply to match growing demand from job growth.
In a conversation with The Politic, Nicholas Lagos, an experienced Arlington-area real estate broker and Board president-elect at the Northern Virginia Association of Realtors, explained how in Northern Virginia “inventory is down about six to seven percent. If you’re buying you’re obviously in a situation where you’re in a competitive mode. If a property goes on the market and its well priced and it shows really well you can stand to see competitive bidding going on.”
With this market in mind, Arlington County began to create “committed affordable units,” whose rent is restricted to half the area’s median income. Cristol is confident that Arlington County’s aggressive affordable housing master plan, formulated in 2015, which in part uses zoning reform to create more affordable units, can limit mentioned negative effects of the deal.
“I don’t personally believe Amazon is going to single-handedly cause an affordable housing problem or even be the major driver. When you look at what we’ve seen out of regional job growth in the D.C. area over last ten years, Amazon will add maybe five percent to it,” said Cristol.
The real estate market’s density diversity also softens the impact of Amazon’s arrival. For one, new employees can live in Arlington, but due to the strong transportation networks, they also have plenty of easily accessible options further away. Surrounding areas are prepared to take in more residents, which would lessen housing issues with Arlington County.
“This is why as a region all the community planners in Arlington, Fairfax County, Falls Church, Loudon County, and even D.C. got together and said, ‘How can we as a whole form a package?’ They offer a package deal of three to four incredibly viable options. There’s no question in the world that we can accomodate all these people,” said Lagos.
By working together, the collective real estate industry is well prepared to take in any new employees who wish to move-in nearby. Arlington County also has space within it to build more dense living arrangements, which can house more residents per lot and provide new affordable housing options.
New York City, however, does not offer quite as diverse of a real estate market with room to grow.
“We have only a finite amount of land in Arlington and Alexandria so density is how we’re getting around the need for more affordable housing,” said Lagos. “They [New York City] have such high density that it may end up upsetting the people in Queens more than us. We’re not as high density as we’re spread out. They don’t have the same options there.”
Queens itself is made up of extremely dense lots already populated with many affordable units. While Northern Virginia has room to take in residents from outside Arlington County and create more livable property within it, Queens is not as fortunate.
Many real estate deals by D.C. area developers already include a promise to create a certain number of committed affordable units. This means the total number of affordable units will likely continue to increase, even after Amazon’s arrival.
Some people aren’t as confident that Northern Virginia won’t feel the effects of its new tenant. Many are particularly concerned about the future of diverse minority populations living in Southern Arlington and Alexandria. Once regions with naturally occurring affordable housing and strong community cohesion, the areas are at risk of gentrification.
“As soon as Amazon lands, all the gentrification from Del Ray is coming. It’s going to move to this area, because the owners of these apartments and businesses—they’re going to start to want to make this area beautiful for different people,” Evelin Urrutia, executive director of Tenants and Workers United, told local station WTOP 103.5 FM.
The aforementioned highly diverse neighborhoods in Southern Arlington and Alexandria that include hispanic Chirilagua are only a short commute from Amazon’s new campus. This makes them perfect locations for homes of new executives.
To try to combat these worries, local officials plan to increase housing supply. Through the support-level jobs created in the area, some officials, like Dorsey, even hope to help underprivileged communities with economic opportunity. Only time will tell if these would be sufficient.
Northern Virginians are generally positive about the Amazon deal, but their position is more reasoned optimism than unapologetic trust.
“The deal will require expert planning. There is a lot more work that needs to be done than just Amazon saying they’re going to come, but I’m very comfortable that their path of growth is something that we can expertly manage,” said Dorsey. Dorsey believes a significant part of the county agrees with him.
“The people just want to make sure government is on top of dealing with any consequences,” Dorsey shared. “I welcome that and I think that probably reflects the plurality of our community. They welcome the opportunity but want to make sure we’re dealing with any challenges.”
While people around the country and world question Amazon’s integrity throughout the HQ2 deal, a different story rings true to local residents in Northern Virginia that will be affected by the new campus.
“While many nationally have called out incentives and cash payments, locals are eager for development in their own backyard,” Jackson du Pont ’22, a resident of Alexandria City, VA, told The Politic.
While many in New York City wish to see the deal rescinded completely, Northern Virginia residents seem willing to give it a chance. Still, they will wait to draw their final conclusions on Amazon until they can truly read the reality of the situation.
“I will root for Amazon in Alexandria when ten years from now I can look back and see Amazon as a force for good both economically and socially in my community. They have a great opportunity to do this,” said du Pont. “As with any large company, though, they will have to ensure that their economic interests don’t overshadow the lives of the people already living here.”