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Amazon splits HQ2 between New York and Arlington, Virginia

A water taxi approaches the Long Island City waterfront and new high-rise luxury apartment buildings in the Queens borough of New York. It is one location for Amazon’s HQ2 which it is splitting between Long Island City and Arlington, Virginia. (AP Photo/Mark Lennihan)

Amazon will split its highly-anticipated HQ2 between two East Coast cities, leaving the company with three headquarters in the United States.

“It is a huge surprise based on what Amazon originally proposed,” GeekWire’s Todd Bishop told KIRO Radio’s Dave Ross. “Essentially they are going to have large centers in various locations around the country – 25,000 each in New York City and Washington D.C.”

Amazon confirmed Tuesday that it has officially chosen Long Island City — located in the New York borough of Queens — and National Landing in Arlington, Virginia for its additional headquarters. The news is notable, not only for revealing the location of HQ2, but that it will be broken into two locations.

“We are excited to build new headquarters in New York City and Northern Virginia,” said Jeff Bezos, founder and CEO of Amazon. “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.”

Amazon also announced it is opening a new Center of Excellence for operations in Nashville. That center will cover customer fulfillment, transportation, supply chain and other needs. It will employ more than 5,000 people.

“This is clearly something that was a big surprise … something that can play into Amazon’s larger logistics growth,” Bishop said.

The decision process has been going on since at least the end of 2017 when Amazon launched a contest that sparked competition among 200 cities across the world, including in Seattle and other areas in Washington state.

Reaction to Seattle?

Bishop promotes that Amazon’s HQ2 move, and splitting it into two new cities, is not entirely a reaction to tense relations with Seattle leaders. The city council recently attempted to pass a head tax — commonly referred to as an Amazon tax — to fund affordable housing. Amazon opposed it.

“I think the head tax reflected the overall undercurrent animosity in Seattle toward Amazon and that certainly played into this decision by Amazon,” Bishop said. “Clearly they will now start focusing their growth in these other three cities. I think that leases and new buildings we have been seeing in Seattle over the past three years, a lot of that will start going elsewhere. So we will not see the growth at the same pace we have seen here in Seattle.”

Councilmember Kshama Sawant has been one vocal city leader targeting Amazon. She has said that Jeff Bezos is “not on our side.” She argued that when Amazon announced it was starting a base pay of $15, pleasing many politicians such as Bernie Sanders, that it wasn’t because of some “mythical benevolence” from Bezos.

Long Island City and Arlington

Amazon will open up new offices in New York’s Long Island City and National Landing in Arlington. Both locations are situated near major metropolitan areas in their respective states. This plan will split employees between the two headquarters at approximately 25,000 each.

According to the company:

The new Washington, D.C. metro headquarters in Arlington will be located in National Landing, and the New York City headquarters will be located in the Long Island City neighborhood in Queens. Amazon’s investments in each new headquarters will spur the creation of tens of thousands of additional jobs in the surrounding communities. Hiring at both the new headquarters will begin in 2019. The Operations Center of Excellence will be located in downtown Nashville as part of a new development site just north of the Gulch, and hiring will also begin in 2019.

Long Island City is across the East River from Manhattan. Amazon notes its cultural atmosphere with breweries, waterfront parks, hotels and restaurants as a few reasons it chose the spot. It also has a significant tech sector. Amazon will invest $2.5 billion into 4 million square feet of “energy-efficient space.” There is potential to expand to 8 million square feet. Tax revenue is expected to be more than $10 billion over 20 years.

Bishop notes that Amazon will get $1.5 billion in performance-based tax incentives at this location — likely measured by what the company contributes to the local economy.

All of that is echoed at the National Landing location, which is three miles from Washington D.C. The tax revenue is expected to be $3.2 billion over the next 20 years. Roughly $573 million in tax incentives are being offered here.

Criticism

The online retailing giant has already faced similar criticism in New York as it has in Seattle. One city council member and one senator have expressed concerns over the company’s affects on the city’s stressed transit and and traffic systems.

In its announcement Tuesday, Amazon promoted Long Island City “has some of the best transit access in New York City, with eight subway lines, 13 bus lines, commuter rail, a bike-sharing service, and ferries serving the area, and LaGuardia and JFK airports are in close proximity.” The company also hyped National Landing’s “three Metro stations, commuter rail access, and Reagan National Airport – all within walking distance.”

“It certainly does seemed to be a very mixed reaction,” Bishop said. “I think the most savvy of these residents recognized what has happened in Seattle — the traffic, the housing prices, pricing out long-time residents.”

The Amazon effect

GeekWire has a corespondent in Arlington monitoring local reaction. The housing market will be one aspect to watch as Amazon employees and executives start exercising the option to move to New York or Arlington, Bishop said.

“A little bit of sarcasm … one person said they look forward to the coming gentrification,” Bishop said.

Redfin Chief Economist Daryl Fairweather reports that the online real estate company saw an 800 percent increase in viewing of homes in Long Island City, and 200 percent in Crystal City, Virginia following news of the HQ2 split.

“The first effect we will see is an increase in inventory, more homes on the market and more options for buyers,” Fairweather said.

“The price point in Crystal City Virginia is very similar to the price point in Seattle,” she said. “In Long Island City, it’s actually a bit more expensive to own than it is in Seattle.”

Fairweather speculates that the move won’t necessarily draw Amazonians hoping to get more bang for their buck, but it will attract those originally recruited from the East Coast.

Washington Governor Jay Inslee also reacted to the HQ2 news Tuesday.

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