Amazon.com has finally made its decision: The company is building two new headquarters in Crystal City in Northern Virginia and Long Island City in Queens. The massive expansion comes with investments of more than $5 billion, 50,000 jobs, and an influx of highly paid workers and their families into the chosen communities. But winning the grand prize also comes with hefty baggage.
Below are some winners and losers.
The Amazon sweepstakes generated more than a year of free publicity for the company. City officials pleaded with the company as they bid to make their cities seem more attractive than their competitors'. Some offered gifts, posted videos of themselves unboxing Amazon Prime packages and even teased that they would change their names. They also proposed a plethora of tax incentives and subsidies to a company run by the richest man in the world. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.) Maryland’s offer, which was among the few that was made public, amounted to $8.5 billion in tax credits and incentives.
On top of being offered such perks, Amazon now has a unique and valuable set of data: an intimate look inside infrastructure plans and labor markets of dozens of cities. As the company continues to grow, it can use this information to try to grab more concessions from state and local governments and gain an edge over its own competitors, analysts say.
With new home bases in the Washington area and New York, Amazon will soon have a huge presence in two talent-rich cities, giving the company a larger pool of workers from which to draw and attractive locations to offer prospective employees.
But the company’s public competition has drawn scrutiny. Critics such as urban studies author and academic Richard Florida have called Amazon’s search for a second headquarters a “sham” that duped cities into giving up huge taxpayer-funded benefits. Others have criticized the company’s decision to split its new headquarters, changing the rules in the middle of the selection process.
Property owners and developers
Landlords and residents looking to sell their homes are seeing green in Amazon’s arrival. The company says that many of its jobs will offer salaries above $100,000, with thousands of highly paid managers and computer engineers looking for a place to settle their families. The surge in housing demand is expected to lead to higher prices. And with an influx of workers who have more money to spend on housing, developers will have greater incentive to build and sell bigger homes and luxury apartment buildings.
Amazon, based in Seattle, estimates that from 2010 to 2016, $38 billion of indirect investments have flowed to the local economy. That could be a sign of things to come for development in the two new locations.
Highly skilled workers
Executives, managers, engineers, lawyers, accountants and administrative professionals based on the East Coast or hoping to move there have yet another major company eager for their talents. The best tech-industry workers near the two new Amazon locations will also see their salaries swell. Employers will have to shell out more cash to retain their top-performing staff members or risk losing them to Amazon. Also, the company’s grand arrival will probably force other big-name companies to expand their footprints in those metropolitan areas to stay competitive in hiring and recruitment, analysts say, offering tech workers even more opportunities.
Renters and low-income residents
As the fortunes of homeowners may rise, first-time home buyers, renters and low-income residents could stand to lose. Amazon’s expansion is expected to trigger escalating housing costs, analysts say, potentially pricing out residents who don’t bring in big paychecks. Rather than erect an apartment building with 50 units, a developer might build 25 larger units with opulent furnishings to cater to the bigger budgets of high-earners. The New York and D.C. metro areas already suffer from housing-affordability issues, which may worsen with the arrival of a steady stream of workers and if home prices take off.
Critics point to Seattle as a harbinger of a worsening housing market and a crisis of homelessness. Residents with lower incomes may see more financial pressure just to maintain their quality of life, experts say.
An analysis by rental-search site HotPads, however, found that rents in the D.C. area would increase by only 0.6 percent with Amazon’s move, Washington Post writers Tracy Jan and Kathy Orton reported.
Certain local business owners
Restaurants, cafes and bars may get more foot traffic from the new workers and residents. But business owners who lease their spaces will also probably face a price hike as demand for real estate in the area increases, experts say. Business tenants who lease office space and don’t offer services or dining will also be hard-pressed to find a benefit from having Amazon settle in. Local shops may see rising costs as their rents increase and, like retailers across the country, will continue to face stiff competition from online-shopping powerhouses like Amazon.
Traffic can always get worse. And it usually does.
The D.C. region’s traffic congestion is among the worst in the country. Along the Interstate 395 corridor, where Amazon would be located, traffic is especially extreme. On Friday, for instance, travelers described total gridlock and chaos as they tried to make their way to Reagan National Airport when Metro service was suspended. Some passengers, desperate to catch their flights, ran to the airport from Crystal City, the neighborhood Amazon will soon call home. (Amazon’s Crystal City HQ is within a half-mile — or a panicked walking distance!)
New York traffic is inescapable, too. As a sign of how bad things are, and how much worse they are getting, the city has the nation’s most extensive congestion-alert system warning drivers to stay off the roads. The number of alert days will rise to 16 this year, up from 10 last year, according to the New York Times, owing in part to construction, a rise in delivery and ride-hailing vehicles, and security-related street closures. A campaign to set up a congestion-pricing plan that would charge drivers in Manhattan for using the most clogged lanes failed to pass this year.
Transit systems in New York and Washington can be nightmarish in their own ways. The D.C. Metrorail system has faced a raft of safety and reliability problems over several years, which has led to falling ridership. But service delays continue to prompt overcrowding. And in New York, a year after the governor declared that the subway is in a state of emergency, service remains dismal.
Rival tech companies
Holding on to the best employees just got harder for Amazon’s competitors in New York, Washington and everywhere else.
Businesses that depend on skilled engineers, product managers, and legal and accounting staff will expect to see their labor costs go up, as they try to stop Amazon from poaching their best. To keep staff from jumping ship, tech companies will be compelled to pay their people higher salaries and boost their perks.
Tech companies without a large Washington or New York presence will also lose an edge in recruiting computer science graduates. Aside from being a world-class technology company, Amazon will now boast a headquarters in two thriving East Coast cities, a huge draw for the next generation of educated young people who don’t see themselves moving to Seattle or Silicon Valley.
Amazon’s selection of the D.C. and New York regions is the latest example of prosperous, talent-rich, highly educated coastal cities winning corporate deals to the detriment of mid-tier and smaller cities. More than 200 locations submitted proposals to Amazon and have now lost out on tens of thousands of jobs and billions of dollars in investments.
In addition, these losing cities may be in a weaker position to secure future corporate headquarters because Washington and New York have gained even more job opportunities, skilled workers and private-sector dollars. Superstar cities with universities, a skilled workforce and cultural cache keep winning business deals, experts say, reinforcing their economic advantages. This dynamic may create a kind of momentum that’s difficult for less affluent cities to overcome.
If investments by large employers continue to flow unevenly across the country, the lopsided pull of wealthy, densely developed, high-paying cities could exacerbate income inequality and entrench an economic system dominated by a handful of prosperous tech hubs, analysts say.
Telling voters that you brought home the big one may seem like a flashy political win for the mayor. But not all constituents may see it that way. To win over Amazon, city officials had to offer attractive incentives, which may have included massive tax breaks and promises to build out public infrastructure. What elected officials might view as a huge jobs victory, taxpayers might see as a fleecing. The benefits that Amazon has promised to the areas might also flow to a narrow subset of people who are already living the dream while the costs will burden everyone. While the immediate upside of landing a prestigious development deal may seem clear, what remains harder to foretell is the long-term consequences of a tech giant becoming a neighbor.