Markets

Amazon HQ2 Goes to Two Cities That Are Already Winners

Recruiting 50,000 Amazon workers to a single market would be difficult. But recruiting half that to two globally oriented markets—Queens, New York, and Arlington, Virginia—represents a much lighter lift.
By Anirban Basu
November 14, 2018
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Markets

After more than 14 months of rumors, speculation, jockeying and lobbying, Amazon somewhat anti-climactically awarded its highly sought HQ2 to Long Island City in Queens, New York, and Crystal City in Arlington County, Virginia. The initial Amazon RFP stated that HQ2 would encompass up to 50,000 jobs averaging more than $100,000 per position and more than $5 billion capital investment. The presumption is that each of the two HQ2 locations will incorporate approximately half of this employment and investment.

By selecting Arlington and New York, Amazon is investing in two cities that are already among the global elite. Of the 20 finalists, the Washington, D.C., region represented three (the District of Columbia, Montgomery County, Maryland and Crystal City). By choosing Crystal City, Amazon executives will have access to the region’s three major airports. Moreover, given emerging discussions regarding antitrust issues and the company’s highly scrutinized human capital practices, the company stands to benefit from being proximate to federal lawmakers and regulators.

The New York City location is served by a confluence of subway lines, a train and two ferry stops, and is close to two international airports. New York City is perhaps the hippest city in America. Long Island City, which was traditionally an industrial neighborhood, has seen a surge in residential development during the past several years and is one of the fastest growing neighborhoods in the city, which should aid in the company’s ongoing effort to recruit young tech talent.

Amazon’s decision to hedge its bets and build two smaller headquarters also makes sense. The nation currently has seven million available job openings and fewer than 6.1 million unemployed Americans, a historic shortfall in available workers. Most of these available workers lack the background to serve at an Amazon headquarters. Recruiting 50,000 headquarters workers to a single market would be difficult under the best of circumstances. But recruiting approximately 25,000 workers over the course of many years to two globally oriented markets represents a much lighter lift. Splitting HQ2 also creates fewer infrastructure capacity issues, at least theoretically.

Though Amazon’s decision-making is sensible from a corporate perspective, the outcome has left some disappointed. Amazon HQ2 stood to be a major catalyst for a number of contending cities, including Indianapolis and Columbus, Ohio. These smaller towns would have been on the cutting-edge of global e-commerce and would have emerged as redefined communities with more impressive built environments, including in the form of large public works.

Months ago, 238 locations across North America spent time and money to respond to Amazon’s RFP. Some places paid millions of dollars to have consultants help with their proposals. The 20 finalists then spent additional resources to lure Amazon, including the creation of lucrative, often controversial, incentive packages.

Alas, there must always be winners and losers in such competitions. The winners won big. A recent analysis conducted by Sage Policy Group and Transwestern estimates that the 25,000-job HQ2 would, upon completion, support approximately 44,000 jobs and more than $4 billion in annual labor income in the greater Washington, D.C., area once multiplier effects are fully considered. Presumably, the impacts in New York stand to be similarly large.

by Anirban Basu

Anirban Basu is chief economist of Associated Builders and Contractors. For more information, visit www.abc.org/economics.

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