Amazon splits HQ2 prize between Virginia, New York

(Richard Vogel | The Associated Press) This Oct. 23, 2018, file photo shows an Amazon logo atop the Amazon Treasure Truck The Park DTLA office complex in downtown Los Angeles. Whether you've bought shoes at Zappos, picked up milk at Whole Foods or listened to an audiobook on Audible, you've been caught up in Amazon's growing web of businesses. And now, Amazon's sprawling empire will stretch even further. The company is expected to announce Tuesday, Nov. 13, that it will open two more bases outside of its Seattle headquarters: one in Crystal City in northern Virginia and the other in New York's Long Island City neighborhood.

Washington • Amazon will open major new outposts in suburban Virginia’s Crystal City and in New York City, splitting its much-sought investment of up to 50,000 jobs between the two East Coast sites, the company announced Tuesday.

"We are excited to build new headquarters in New York City and Northern Virginia," Amazon founder and CEO Jeff Bezos said in a statement. "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."

The company also announced that it selected Nashville, Tennessee, for a new Center of Excellence for its Operations business, which is responsible for the company's customer fulfillment, transportation, supply chain, and other similar activities.

The choice of Crystal City in Arlington County as one of the winners cements Northern Virginia's reputation as a magnet for business and potentially reshape the Washington region into an eastern outpost of Silicon Valley over the next decade.

The decision hands Virginia Gov. Ralph Northam, D, and local leaders the largest economic-development prize in a generation — one promising billions of dollars in capital investments alone — but could also put pressure on the region’s already steep housing prices, congested roads, and yawning divide between wealthy and low-income residents.

It also represents a victory for New York Mayor Bill de Blasio, D, and Gov. Andrew Cuomo, D, who had joked that he would change his name to "Amazon Cuomo" if necessary to land the project.

Other final suitors included Washington, D.C., its Maryland suburb Montgomery County and 16 other jurisdictions Amazon considered since narrowing its list in January. News of the decision was first reported by the Wall Street Journal. Amazon could reward some of the finalists with smaller but still significant projects, some of the people said.

AOL co-founder Steve Case, who now works with tech entrepreneurs in smaller cities, issued a statement encouraging them not to lose faith despite the selection of two East Coast stalwarts.

"The best economic strategy is not to lure existing companies to open offices or factories, but instead to birth the new companies that could be the Amazons of tomorrow," he said. But in the same breath, the longtime Northern Virginia resident took a victory lap: "Amazon's announcement is a win not just for VA, but also for the entire greater D.C. region."

Groups opposed to corporate subsidies also began rallying their supporters, in New York City and Northern Virginia, in advance of learning what the winning state and localities had agreed to provide the company behind closed doors. Public officials in both locations refused to provide details of their offers to Amazon.

"Thousands of new high-paying jobs could be a boon to our community, but we deserve to know the cost," said Anna Scholl, executive director of the advocacy group Progress Virginia. "Tens of thousands of new workers and their families are sure to strain community resources when it comes to affordable housing, mass transit and traffic, and quality local schools. It's only right that Amazon pay their fair share."

Amazon's decision to split the project rather than open a second headquarters on par with its Seattle campus has angered some who said the company had ginned up competition among cities only to change the rules midstream. Some said it was unfair that the company seemed to be considering only sites in more affluent communities.

Amazon launched the project in the fall of 2017, dubbing it HQ2 and issuing search criteria for "a second corporate headquarters" with as many as 50,000 jobs and an investment of $5 billion.

Bezos personally described the scope of the project, saying in a news release, "We expect HQ2 to be a full equal to our Seattle headquarters." Bezos owns The Washington Post.

Others said a split makes sense for Amazon because of the difficulty of finding 50,000 qualified workers, many of them computer engineers, in a single region. Dividing the project also could ease concerns about the pressure that the company's growth could put on housing, transportation networks and schools.

In picking Crystal City, Amazon opted for a close-in suburban site, just across the Potomac River from Washington and a half-mile from Reagan National Airport. Outdated buildings and underused properties now fill the site, where some office buildings have yawning vacancies.

In New York, the company had been eyeing a neighborhood in Queens called Long Island City, across the East River from Midtown Manhattan.

Arlington County offered Crystal City as part of a joint bid with an adjoining property at Potomac Yard, in the city of Alexandria. The state played a leading role in sponsoring the bid, including offering incentives that have not been disclosed publicly.

The selection represents a triumph for the growth strategy of Arlington and Alexandria to promote development along mass-transit routes. The site is close to the Crystal City Metro station on the Blue and Yellow lines, and the planned Potomac Yard station scheduled to open in 2021.

But residents in Alexandria's nearby Del Ray neighborhood expressed worry earlier this year that Amazon's arrival would worsen daily rush-hour backups that already slow traffic to a crawl, and would erode the quality of life in their neighborhood of mostly single-family homes.

The decision marks a dramatic upturn in fortune for Crystal City, which lost thousands of jobs when military agencies and defense contractors departed in the Pentagon's Defense Base Closure and Realignment Commission (BRAC) process, beginning in 2005.

The initial building that Amazon will occupy is at 1851 South Bell St. or 1770 Crystal Dr. in Arlington, according to individuals familiar with the decision.

One advantage is that the properties are all overseen by a single, well-capitalized company, JBG Smith. The $4.4 billion firm is the region’s biggest real estate owner and most active developer, and it owns a majority of the property in the bid — enough to accommodate the entire project on its own.

Amazon's choice also burnishes Northern Virginia's standing as an attractive site for corporate headquarters. In the past 15 years, it has lured Volkswagen Group of America to Herndon, Northrop Grumman to Falls Church, Hilton Worldwide to Tysons and Nestle's U.S. headquarters to Arlington.

Northam said in March that the state's pitch centered on workforce development, inclusivity and transportation, along with quality of life.

Although 238 locations initially submitted proposals to Amazon, many experts considered the Washington region a favorite from the outset because of Bezos's personal connections in the region, particularly the $23 million mansion he purchased in the city's Kalorama neighborhood last year and his ownership of The Post.

Others suggested that Amazon executives want to be near Washington to cozy up to the federal government, either because of increased concerns that regulators may pursue antitrust actions against the company or because the government has become a critical Amazon customer.

Virginia also offers the political advantage of being a purple state, making it easier for the company to seek support from both parties.

Amazon previously announced that it would headquarter its cloud computing unit, Amazon Web Services, in Herndon, near some of its data centers.

The Washington area also naturally fit many of the criteria Amazon called for in its search, among them a deep pool of talented workers, a robust public-transit system and easy airport access.

In discussions with local officials this year, Amazon executives were especially focused on the quality of the workforce and availability of affordable housing, according to Hoskins, the Arlington economic development director.

When Amazon narrowed the list of contenders to 20 in January, it included three in the Washington area — the District, Northern Virginia and Montgomery County — more than any other part of the country.

Amazon launched its search in September 2017, vowing to make a decision by the end of 2018 and occupy an initial building of 500,000 square feet in 2019.

The company says its Seattle headquarters has injected $38 billion beyond what the company spent on its buildings into the area economy, generating an additional $1.40 for every dollar the company spent.

Seattle officials have not disputed the figures, but they have also been racing to keep up with the company's staggering growth and the requirements it places on public transit, schools, road networks, parks and utilities. The company now has more than 45,000 employees, occupying more than 40 buildings and 10 million square feet of office space.

Compared with other large corporations, Amazon employees are less likely to commute by car, as about 55 percent either walk, bike or take public transit, according to a survey the company did of its Seattle workforce. The company purchases transit cards for employees and is building a dedicated cycle track to separate bikes from cars near its Seattle buildings.

Amazon's growth is also likely to put new strains on housing. Since Amazon's arrival, Seattle has become one of the most expensive places in the United States to live, forcing lower-income residents to move to far-off suburbs. The city and surrounding King County declared a state of emergency in 2015 over homelessness.

Even without Amazon, the Metropolitan Washington Council of Governments estimated that the region needs to add 235,000 housing units by 2025 to keep pace with expected job growth. Amazon's arrival could push the goal above 267,000, according to a recent analysis by the Urban Institute. Right now it is on pace to add about 170,000 new units by 2026.

Since beginning the headquarters search, Bezos and the company have made several announcements that could soften Amazon's image as it moves to open its second hub.

Bezos announced in September that he would donate $2 billion of his own money to support groups battling homelessness in America and to create a network of preschools in underserved communities. In October — after bearing months of criticism from Sen. Bernie Sanders, I-Vt., over its treatment of workers — Amazon announced that it would raise its minimum wage for all employees to $15 per hour.

The minimum-wage decision isn't likely to have much effect on the company's hiring in Northern Virginia, where Amazon says its facility will employ mainly white-collar workers with an average salary of more than $100,000 a year.

Before Amazon announced its search, Washington-area jurisdictions — forced in part by federal budget cuts — had already been diversifying their workforces away from a reliance on federal spending. The region gained more than 55,000 jobs annually from 2015 to 2017 despite budget cuts and stagnation in Congress. But its job growth has been slower than average among major metropolitan areas.

The Post’s Gregory S. Schneider contributed to this report.