Amazon's two HQ2 picks are suddenly white-hot real estate markets

Amazon HQ

Amazon HQ

When Amazon announced that it would be splitting its long-awaited HQ2 between Long Island City in Queens, New York, and Crystal City in Arlington, Virginia, it left 17 other "finalists"-who weren't within throwing distance of Manhattan and Washington, D.C. -joining the chorus that perhaps the race to win HQ2 was less of a "contest" than originally advertised". But the influx is sure to swell already-high home prices and apartment rents and could overwhelm public transportation systems.

In the bid to lure Amazon, Dallas didn't promise the $2.1 billion level of financial incentives the company stands to get from NY and Virginia. However, the official statement released Tuesday left Beltway residents confused over what many online interpreted as a new name for the Arlington neighborhood Amazon plans to call home.

In this case, the ability to recruit highly educated workers seemed to be the top concern, said Mark Muro, a senior fellow at the Brookings Institution, a think tank in Washington. The Foxconn deal, which has since grown even more expensive, has produced a public backlash in Wisconsin.

- Performance-based direct incentives of $1.525 billion, based on 25,000 full-time, high-paying jobs created.

NY and Virginia beat out 18 others, including Los Angeles and Chicago, that were on a short list Amazon released in January.

- More than 25,000 full-time jobs with average wage exceeding $150,000. Taiwanese manufacturer Foxconn, for example, received $4.8 billion in subsidies for a plant in Wisconsin on which it broke ground this year. "Courses and certificates taught and earned through the Amazon Georgia Academy will help instruct and guide local decisions regarding academic curriculum and student learning choices, helping to transform future young professionals, as well as potentially inform Georgia's entire education ecosystem", the proposal continued. For example, Wisconsin previous year offered the Taiwanese electronics manufacturer Foxconn $3 billion in incentives for a project meant to employ 13,000 workers, at wages far lower than those promised by Amazon.

Amazon will begin its Long Island City project in January 2019 and hire 25,000 employees by 2028, according to a memorandum of understanding between the company and NY officials. That's based on a tax credit of $3,000 for each new employee. If they decide not to cash out on their investment for up to seven years, they receive another benefit: They get to exclude up to 15 percent of those gains from taxes.

Amazon's NY site could also qualify for federal tax breaks under the tax law passed by Republicans late late year.

Already, a NY state legislator has signaled he plans to introduce a bill to block the deal by phasing out the economic incentive statutes upon which the agreement is based.

"I was surprised the package wasn't bigger", said John Boyd, a site selection consultant who wasn't involved in the Amazon search. "Amazon is now treating even the biggest of American cities with the same disrespect it shows for the suppliers and the merchants who depend on its website to reach customers". "This is a brand that we put together for this regional partnership", Cara O'Donnell, a spokesperson for Arlington County said.

While the incentives offered to Amazon are sizable, some of the other locations hoping for the nod had offered more.

"We're anxious about our ability to stay in the neighborhood", Dixon said. "The slowdown that happened in Long Island City is now not going to happen".

- Estimated incremental tax revenue of more than $1 billion over the next 10 years. The agreement with the state doesn't spell out the structure of the deal with Plaxall, except to indicate that ESD will acquire the properties for a dollar and then transfer them to Amazon.

"We won the real estate broker lotto", said Benaim. "But only they really know what they want, and what they need".

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