Amazon announces NYC and Northern Virginia as HQ2 winners

After a year of hype and anticipation, Amazon picked not one, but two locations for its HQ2 project.

The world’s largest online retailer on Tuesday selected Long Island City in New York City’s Queens borough and National Landing (a new name for the Crystal City neighborhood) in Arlington, Virginia, outside Washington, DC. The picks, which were already widely anticipated for the past week, are expected to each land 25,0000 well-paid jobs.

“These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come,” Amazon CEO Jeff Bezos said in a statement.

Amazon also said it has selected Nashville to host a new 5,000-person “center of excellence” for its operations business, which handles customer fulfillment, transportation, supply chain and other activities. It plans to start hiring at all three locations next year.

New York is offering Amazon $1.525 billion in incentives, and Virginia $573 million, pegged to the company’s proposal to create 25,000 jobs at each location. Tennessee is offering up to $102 million for 5,000 jobs. As part of these agreements, the positions in all three cities will need to have an average wage of $150,000, Amazon said.

In New York, Amazon agreed to donate a site for a new primary or secondary school, and fund infrastructure improvements and green space.

Tuesday’s decision got positive responses from Virginia’s public officials, who said they plan to use the new site to build up the are’s tech jobs. New York City Mayor Bill de Blasio and Governor Andrew Cuomo, both Democrats, lauded the plan. “This is a giant step on our path to building an economy in New York City that leaves no one behind,” de Blasio said in a statement.

New York City is about to get tens of thousands of new, good paying jobs and Amazon is about to meet the most talented work force in the world in one of the most diverse places on the planet. Welcome to Queens, #HQ2.

— Mayor Bill de Blasio (@NYCMayor) November 13, 2018

However, not all New York politicians were pleased with the situation. Alexandria Ocasio-Cortez, an incoming Democratic congresswoman representing Queens and the Bronx, was among several local leaders questioning the deal, tweeting: “Amazon is a billion-dollar company. The idea that it will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need MORE investment, not less, is extremely concerning to residents here.”

After growing in Seattle over the past two decades, Amazon in September 2017 announced plans to create a second headquarters, dubbed HQ2, in North America. It set off a buzzy, reality-show-like contest among cities to snag the development. Amazon planned to announce by the end of this year where it would locate HQ2.

The size of the project is breathtaking: Over the next 15 to 17 years, Amazon said it planned to spend $5 billion to develop an 8-million-square-foot site and hire 50,000 employees. Those numbers are now split in half, with $2.5 billion in spending on 4 million square feet of space and 25,000 employees at each location. By comparison, Amazon’s Seattle headquarters, which spans 33 buildings, cost $3.7 billion to build and employs 45,000 people. The new locations will add to Amazon’s already rapidly growing staff of 613,300 people worldwide. 

While the company first presented HQ2 as a “full equal to Amazon’s headquarters in Seattle,” some have already quibbled that Amazon is instead building two large regional offices, not two more headquarters.

Still, HQ2 serves as another sign of Bezos’ huge ambitions, with his company spreading from retail into entertainment, health care, cloud computing, robotics and artificial intelligence.

The project was so heavily sought after by local politicians that Amazon was offered billions of dollars in potential incentives and serenaded with gifts, silly videos and over-the-top gestures. As part of his efforts to snag the project, New York Governor Andrew Cuomo even said: “I’ll change my name to Amazon Cuomo if that’s what it takes.”

But it won’t be all puppies and rainbows for the cities that landed HQ2. Traffic and rents are expected to surge. Homelessness has become a persistent problem in Seattle after housing costs shot up. Some of those problems may be mitigated by splitting the project between two cities, but they’re unlikely to go away entirely.

Also, there’s always a chance Amazon’s big promises will fizzle, or its plans may change, resulting in far less investment and fewer jobs than promised.

Let’s run through some of the most pressing questions about HQ2 and what they could mean for Amazon and its future homes:

Why does Amazon want to build HQ2?

Earlier this year, a company spokesman said Amazon is looking to tap into a new talent pool, particularly in software development and related areas, “to continue hiring and innovating on behalf of our customers.”

With plans to hire 50,000 more people in high-demand fields, Amazon likely needed to look beyond Seattle. Competition for top talent with Microsoft and Boeing, as well as skyrocketing real estate prices, would make such a large expansion in Seattle difficult and expensive.

Amazon’s rocky relationship with its hometown is probably another factor. The city government this year imposed — then quickly repealed — a new tax on major employers. As the tax was being considered, Amazon paused some of its local expansion plans, which some saw as a hardball tactic to pressure Seattle’s government. Many locals are critical of Amazon’s fast growth, which has resulted in more jobs and a stronger economy, but also higher housing costs and more traffic. Amazon said it wanted to find a “stable and business-friendly environment” for its next home, which some might read as, “friendlier to Amazon than Seattle.”

Also, Amazon is now the second most-valuable company in the US after Apple, and is expanding in Europe, the Middle East, India and China. New headquarters on the other side of the country could help it oversee to its global workforce and its increasingly international customer base and partners.

Where were people expecting HQ2 to go?

According to several reports last week, Amazon was closing in on a handful of locations, including New York City, Dallas and Northern Virginia. JBG Smith, a real-estate company that owns much of the office space in Crystal City, already saw its stock jump in anticipation of the announcement.

Even before last week’s reports, the DC area had long been seen as the front-runner for HQ2, since Amazon picked three separate locations in the vicinity among its 20 finalists. There are a bunch of other pluses for the region: Bezos owns The Washington Post, Amazon’s interest in federal government cloud-computing contracts is growing, and Bezos purchased the largest home in DC. More broadly, Amazon had been seen as strongly favoring the Northeast, with eight of the finalists there.

Moody’s Analytics did its own review of the finalists and placed Boston in the top slot, followed by New York and Philadelphia — all three among those eight Northeast picks.

Amazon picked most of the eight Northeast spots in different states (or, in DC’s case, a district), making it easier for the company to pit those states against each other and get the best possible incentives package.

Are two HQ2 locations better than one?

That depends whom you ask. A new 50,000-person campus, even in a major city, would be a daunting project and likely to strain local infrastructure. Two 25,000-person offices are likely to be more manageable, easier to site and still huge — providing a big economic benefit for both locations. The move will also mitigate some concerns about traffic, rents and Amazon’s reported worries it won’t be able to hire enough tech talent in any one city.

However, some people are complaining that picking two spots undercuts the entire point of announcing HQ2, since the locations likely won’t be equals to Seattle and therefore not actually HQs. All the excitement and attention and news stories hyping the project wouldn’t have reached such a fevered pitch had Amazon instead announced plans to build two new satellite offices.

Two of Amazon’s biggest satellite locations are already in New York, with about 1,800 workers across the state, and Northern Virginia and Washington, with about 2,500 workers. Amazon last year announced plans to double its staff in New York City.

So it’s not surprising taht at least a few industry watchers saw the HQ2 search as a farce and a PR stunt that’s allowed Amazon to gain months of positive news coverage and extract more incentives from local governments. 

The benefits for Amazon don’t stop there. The company gained mountains of valuable data from dozens of states and cities that it’s now expected to use for its future development plans and to outfox its rivals. Having two winners could also allow Amazon to pit both cities — as well as Seattle — against each other for future expansion plans, helping it maintain a strong negotiating position.

How did cities try to sell themselves?

The initial HQ2 announcement essentially kicked off a “beauty contest” among municipalities. Because the company said it was looking for “communities that think big and creatively,” many cities made sweeping and goofy gestures to get Amazon’s attention.

Tucson, Arizona, for instance, sent a 21-foot saguaro cactus to the tech giant. New York City lit several landmark buildings in “Amazon orange.” And the city of Stonecrest, Georgia, offered to rename a part of itself Amazon, Georgia.

After Amazon chose its finalists, the selection process mostly went quiet, with Amazon and those 20 cities declining to say much about the goings-on. Critics derided the lack of transparency, saying taxpayers have a right to know what incentives they’ll be expected to pay for.

But some information did come out, and money certainly was a big factor for the finalists, much more than circus-like stunts to get noticed. Amazon wasn’t shy about asking for incentives.

Montgomery County, Maryland, offered the biggest publicly known incentives package, at $8.5 billion. Yes, that’s much more than the $5 billion Amazon plans to spend on HQ2, so Maryland seemed to be hoping Amazon’s halo effect would bring in indirect jobs and busines.

Newark, New Jersey, offered the second biggest known package, at $7 billion.

On the other end of the spectrum was Toronto, the only city outside the US to make the shortlist. It offered no direct incentives package for HQ2, but Amazon might have seen some appeal in Canada’s universal health care and a number of government tax credits and grants.

Who were the finalists?

In all, 238 bids from the US, Canada and Mexico came in for HQ2. In January, Amazon narrowed that list down to 20 locations:

• Atlanta
• Austin, Texas
• Boston
• Chicago
• Columbus, Ohio
• Dallas
• Denver
• Indianapolis
• Los Angeles
• Miami
• Montgomery County, Maryland
• Nashville, Tennessee
• Newark, New Jersey
• New York City
• Northern Virginia
• Philadelphia
• Pittsburgh
• Raleigh, North Carolina
• Toronto
• Washington, DC

Will HQ2 benefit the winning cities?

For the local economy and jobs, Amazon is promising a big boon, with a lot of indirect investment coming thanks to all the activity from Amazon. Seattle has seen huge growth and a building boom largely due to Amazon, so these promises are backed by evidence.

However, Seattle offers plenty of reasons why HQ2 isn’t a plain and simple victory for the winning bidders. Traffic will worsen, rents will go up and local tech businesses may lose their best people to Amazon. Becoming such a large local employer could also allow the company to exert pressure on officials to get what it wants, as it did in the case of Seattle’s repealed tax on employers.

Also, HQ2 is such a big project that it has the potential to change the character of the winning locales.

Amazon said it plans to partner with the winners to ensure that its project is a positive force and that traffic and other issues are mitigated.

How does HQ2 affect Seattle?

Amazon will continue to operate its original headquarters in Seattle and keep expanding there. However, city leaders worry that the company won’t invest as much in the local economy after it creates other main campuses. Time will tell if that happens.

Given the split decision on HQ2, Seattle seems likely to retain its status as Amazon’s true headquarters, offering some comfort for city officials.

Are any other big tech companies shopping around for a new campus?

One, at least. And Apple is taking a decidedly quieter approach in its search for a new US site. In a sign of just how lucrative and powerful US tech companies have become, Apple is also looking to spend billions on a new campus, as part of its stepped-up spending on buildings and more workers in the country. Also, Google is reportedly planning to expand in New York City, looking for space for over 12,000 more employees.

First published Aug. 9 at 5:00 a.m. PT.
Update Nov. 7 at 5:00 a.m. PT: Added information on Amazon’s reported plans to split HQ2.
Update Nov. 13 at 7:04 a.m. and 11:10 a.m. PT: Added Amazon’s announcement of the winning cities and more details.

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