Update: Amazon Scraps Plans for New York City Headquarters Hub, Citing Political Opposition

Update: Amazon Scraps Plans for New York City Headquarters Hub, Citing Political Opposition

Online Giant Says It Will Stick With Developments in Arlington, Virginia, and Nashville, Tennessee

BY DIANA BELL (via CoStar)

New York City's Long Island City neighborhood, above, where Amazon plans a major staffing hub. Photo: Jayson Photography

New York City’s Long Island City neighborhood, above, where Amazon plans a major staffing hub. Photo: Jayson Photography

(Updated Feb. 14 to add reaction from officials and executives.)

Amazon said it is scrapping its plans to add a headquarters hub in New York City’s Long Island City neighborhood after local politicians criticized tax incentives and other parts of the deal that led the online retailer to choose the location over more than 230 other cities last year in a highly publicized search.

The Seattle-based company said it will not seek another location for the operations it had planned to build in New York, instead spreading the expansion over its existing offices across the United States. The statement on Amazon’s website added it will proceed as planned in Arlington, Virginia, where it decided to place half its second headquarters site, known as HQ2, and in building a key logistics center in Nashville, Tennessee. “We will continue to hire and grow across our 17 corporate offices and tech hubs in the U.S. and Canada,” Amazon said.

Amazon added that “the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term. A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward.”

Amazon’s 17 corporate offices and tech hubs currently located across North America.

CoStar News reported early Feb. 7 that some real estate professionals in New York, those with the most at stake financially, were concerned the deal could fall apart. They criticized opposition from some key state and local officials who didn’t like the tax breaks that were handed to Amazon, a company with a stock market value that has surged as high as $1 trillion that said it wouldn’t drop its opposition to union workers in heavily unionized New York. The Washington Post later reported Amazon had begun reconsidering its move, saying the retailer and Chief Executive Jeff Bezos, who owns the Post, haven’t yet bought or leased land in New York.

Within hours of Amazon’s announcement Thursday, developers slammed what they said is a precedent of politics interfering with corporate relocation into the nation’s most-populous city. “Political backlash on this deal was short-sighted, because all of the great economic benefits that would have eventually come with the Amazon HQ2 deal have been shattered,” said Thomas Donovan, a partner at commercial real estate brokerage B6 Real Estate Advisors who specializes in Long Island City. “Big projects that were being pushed and given more juice by the possibility of Amazon, those developers will have to take a step back now.”

He added that Long Island City, in the borough of Queens, is still strengthening as a commercial real estate market, so he can’t yet estimate the extent of the fallout of Amazon’s exit. His concern and frustration was echoed by Carlo A. Scissura, chief executive of the New York Building Congress, the 98-year-old membership association representing development professionals and tradespeople.

“We are extremely disappointed that with the majority of New Yorkers supporting Amazon’s selection of Long Island City for its HQ2, political posturing got in the way of good government policy,” Scissura said. “It is sad that the loud voices of a few can derail an opportunity that would benefit countless people. New York City is the new capital of the tech industry, and this is where Amazon belongs.” He added the pullout “will cost the city tens of thousands of high-quality jobs, leave a lasting, negative economic impact, and send a cautionary message to companies around the world about calling New York home.”

And Josh Lipton, co-founder of New York-based commercial real estate services firm Invictus Property Advisors, said “local stakeholders in the Queens community who would have benefited from the Amazon HQ2 move to Long Island City are surely licking their wounds with the recent announcement of Amazon pulling out. But, hey, this is New York, the most resilient city in the world, and this represents nothing more than a miniscule blip on the neighborhood’s growth trajectory.”

State Sen. Michael Gianaris kicked off the political opposition earlier this month by saying he was willing to use an influential position on a state board he has yet to join to scrap the development agreement that convinced Amazon to choose New York City. He traded arguments in public statements with Gov. Andrew Cuomo, who pushed hard for Amazon to come to New York.

Gianaris, who represents the Queens district that includes Long Island City, responded Thursday to Amazon’s decision after he made weeks of steady attacks on the company by saying “today’s behavior by Amazon shows why they would have been a bad partner for New York in any event. Rather than seriously engage with the community they proposed to profoundly change, Amazon continued its effort to shakedown governments to get its way. It is time for a national dialogue about the perils of these types of corporate subsidies.”

Councilman Declares ‘Victory’

And even after New York real estate professionals grew concerned about the potential for the political attacks on Amazon to destroy the deal, New York City Council member Jimmy Van Bramer doubled down this week. Van Bramer, a Democrat who represents the 26th District of Queens including Long Island City, reiterated his concerns to financial news cable television network CNBC by arguing Amazon wanted to come to Long Island City all along and didn’t need to be lured with economic incentives. He also has accused Amazon of cooperating with U.S. Immigration and Customs Enforcement as the agency seeks illegal immigrants.

A few hours after Amazon’s announcement, Van Bramer released a statement saying that “defeating an anti-union corporation that mistreats workers and assists ICE in terrorizing immigrant communities is a victory. Defeating an unprecedented act of corporate welfare is a triumph that should change the way we do economic development deals in our city and state forever.”

He added “when our community fights together, anything is possible, even when we’re up against the biggest corporation in the world. I am proud that we fought for our values, which is a fight for working families, immigrants, and organized labor.”

New York City Mayor Bill DeBlasio, who received thanks from Amazon in its blog post, said in a statement that “you have to be tough to make it in New York City. We gave Amazon the opportunity to be a good neighbor and do business in the greatest city in the world. Instead of working with the community, Amazon threw away that opportunity. We have the best talent in the world and every day we are growing a stronger and fairer economy for everyone. If Amazon can’t recognize what that’s worth, its competitors will.”

Cuomo issued a statement saying “a small group politicians put their own narrow political interests above their community, which poll after poll showed overwhelmingly supported bringing Amazon to Long Island City, the state’s economic future and the best interests of the people of this state.” He also said members of the state Senate who opposed the deal have “done tremendous damage” and “should be held accountable for this lost economic opportunity.”

The local development group in Long Island City was hit hard by the news. “The departure of Amazon’s HQ2 is a tremendous disappointment and blow to Long Island City residents, businesses, non-profits and more, who were eager to seize on the opportunities created by the largest economic development project in New York’s history,” according to a statement from the Long Island City Partnership, a community organization that worked closely with Amazon to source the available land it would have developed. “On the brighter side, the world is getting to see what Long Island City has to offer.”

Amazon gave an initial sign of deep trepidation about the political developments when asked about the criticism, and was told of real estate professionals’ concern, by CoStar News on Feb. 7. Instead of its common response of no comment, the world’s largest online retailer provided a statement and a public opinion poll it paid for that found that New York residents are in favor of it building a staffing hub in Long Island City. The commissioning of a poll was a stark turnaround for the retailer, which had alienated many politicians by refusals to comment publicly or privately to many of them about the process during the year the site selection was underway.

The griping by Van Bramer and Gianaris caused metropolitan Miami, Atlanta, Chicago and other cities to circle back with Amazon to see if it will reconsider its decision to choose New York City. Even South Baltimore and Brookhaven, New York, areas of the country that weren’t among 20 named finalists early last year, said they wanted another bite at the Amazon apple and asked to be reconsidered.

The concern reached a critical mass when Steven Roth, chief executive of real estate investment trust Vornado Realty Trust, used the company’s question-and-answer segment during an earnings conference call with analysts this week to issue a prescient warning. Roth said of Amazon, “it’s a huge company with an enormous number of high-paying jobs. If the political climate blows this deal, it will be the stupidest damn thing I’ve ever seen. And that’s what I think.”

Roth didn’t immediately comment Thursday on Amazon validating his warning by deciding to end the deal. Roth had also hinted that the squabbling could get in the way of New York City cementing its status as a technology hub that could draw more businesses and development unless the political climate hurts the appeal of the city. He cited a recent study by Savills Studley that determined New York City was the top tech center in the world, based on analysis of talent pool, transportation, lifestyle and business environment.

Just across the Hudson River from New York City, officials in Newark, New Jersey, were immediately angling to make the state’s largest city a beneficiary of Amazon’s decision not to locate in Long Island City. The state of New Jersey and the city of Newark had offered Amazon $7 billion in tax incentives to come to the urban center, and Newark made the list of 20 finalists in the HQ2 search.

New Jersey Gov. Phil Murphy said within an hour of Amazon announcing it was scrapping its New York plans that he had reached out to the company. “After learning of the decision to pull out of their chosen HQ2 location, I contacted Amazon and City of Newark stakeholders directly, continuing a constant dialogue that predates my time as governor,” he said in a statement. “New Jersey is open for business, and now more than ever, Newark is the clear choice as the next presence for Amazon corporate offices. Amazon now has the opportunity to join in Newark’s story of a city on the rise.”

Newark Mayor Ras Baraka, who has been presiding over an economic revival in the city, also issued a statement on Amazon’s decision. “Given the city and state’s assets, a strong talent pipeline, a diverse tech base, unmatched infrastructure and a highly accessible location, we are well poised to accommodate Amazon should they want to relocate New York City’s portion of HQ2, in whole or part,” Baraka said.

A Northern New Jersey business group, the Commerce and Industry Association of New Jersey, reacted to the news of Amazon’s pullout by posting a message. “New Jersey is open for business Amazon.com – if you reconsider opening your HQ2, the Garden State would love to have you.”

CoStar News reporters Linda Moss, Paul Owers and Richard Lawson contributed to this report.